    [Senate Hearing 117-771]
    [From the U.S. Government Publishing Office]

                                                        S. Hrg. 117-771

                          ANTITRUST APPLIED: EXAMINING
                           COMPETITION IN APP STORES
    =======================================================================

                                    HEARING

                                   BEFORE THE

                      SUBCOMMITTEE ON COMPETITION POLICY,
                         ANTITRUST AND CONSUMER RIGHTS

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                              UNITED STATES SENATE

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 FIRST SESSION

                                   ----------

                                 APRIL 21, 2021

                                   ----------

                              Serial No. J-117-12

                                   ----------

             Printed for the use of the Committee on the Judiciary

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                            www.judiciary.senate.gov
                                www.govinfo.gov

                                   ----------

                         U.S. GOVERNMENT PUBLISHING OFFICE
    54-138                    WASHINGTON : 2026
    =======================================================================
                           COMMITTEE ON THE JUDICIARY

                       RICHARD J. DURBIN, Illinois, Chair
    PATRICK J. LEAHY, Vermont            CHARLES E. GRASSLEY, Iowa, Ranking
    DIANNE FEINSTEIN, California             Member
    SHELDON WHITEHOUSE, Rhode Island     LINDSEY O. GRAHAM, South Carolina
    AMY KLOBUCHAR, Minnesota             JOHN CORNYN, Texas
    CHRISTOPHER A. COONS, Delaware       MICHAEL S. LEE, Utah
    RICHARD BLUMENTHAL, Connecticut      TED CRUZ, Texas
    MAZIE K. HIRONO, Hawaii              BEN SASSE, Nebraska
    CORY A. BOOKER, New Jersey           JOSH HAWLEY, Missouri
    ALEX PADILLA, California             TOM COTTON, Arkansas
    JON OSSOFF, Georgia                  JOHN KENNEDY, Louisiana
                                         THOM TILLIS, North Carolina
                                         MARSHA BLACKBURN, Tennessee
                 Joseph Zogby, Chief Counsel and Staff Director
          Kolan L. Davis, Republican Chief Counsel and Staff Director

                     SUBCOMMITTEE ON COMPETITION POLICY,
                         ANTITRUST AND CONSUMER RIGHTS

                        AMY KLOBUCHAR, Minnesota, Chair
    PATRICK J. LEAHY, Vermont            MICHAEL S. LEE, Utah, Ranking
    RICHARD BLUMENTHAL, Connecticut          Member
    CORY A. BOOKER, New Jersey           JOSH HAWLEY, Missouri
    JON OSSOFF, Georgia                  TOM COTTON, Arkansas
                                         THOM TILLIS, North Carolina
                                         MARSHA BLACKBURN, Tennessee

                    Ajay Kundaria, Democratic Chief Counsel
                      Wendy Baig, Republican Chief Counsel

                               C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page

    Klobuchar, Hon. Amy..............................................     1
    Lee, Hon. Michael S..............................................     4

                                   WITNESSES

    Andeer, Kyle David...............................................     6
        Prepared statement...........................................    99
        Responses to written questions...............................   111

    Cooper, Dr. Mark.................................................    10
        Prepared statement...........................................    69
        Responses to written questions...............................   115

    Daru, Kirsten....................................................    13
        Prepared statement...........................................    52
        Responses to written questions...............................   114

    Gutierrez, Horacio...............................................    11
        Prepared statement...........................................    84
        Responses to written questions...............................   116

    Sine, Jared......................................................    14
        Prepared statement...........................................    66

    White, Wilson....................................................     8
        Prepared statement...........................................   102
        Responses to written questions...............................   118

                                    APPENDIX

    Items submitted for the record...................................    51

                          ANTITRUST APPLIED: EXAMINING
                           COMPETITION IN APP STORES

                                  ----------

                           WEDNESDAY, APRIL 21, 2021

                                  United States Senate,
                        Subcommittee on the Competition Policy,
                                Antitrust, and Consumer Rights,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 2:30 p.m., in
    Room 226, Dirksen Senate Office Building, Hon. Amy Klobuchar,
    Chair of the Subcommittee, presiding.
        Present: Senators Klobuchar [presiding], Blumenthal,
    Ossoff, Lee, Hawley, and Blackburn.

                OPENING STATEMENT OF HON. AMY KLOBUCHAR,

               A U.S. SENATOR FROM THE STATE OF MINNESOTA

        Chair Klobuchar. Good afternoon, everyone. Sorry we are a
    little late, but we had a vote this afternoon. Thank you,
    Senator Lee, for working with me and our two staffs together on
    this hearing. I call to order this hearing of the Subcommittee
    on Competition Policy, Antitrust, and Consumer Rights. The
    title of this hearing is ``Antitrust Applied: Examining
    Competition in App Stores.'' I welcome our witnesses.
        In our hearing, we are going to examine the scope of
    America's monopoly problem and discuss what should be done to
    protect and foster competition in the 21st century. Today we
    will focus on competition in what we call the app economy. We
    will discuss competition relating to the mobile applications
    that run on our smart phones, including revenues generated
    through app sales and in app purchases, we, well as app related
    ad revenues and sales of devices designed to run apps.
        In 2020, global app revenues have been estimated at more
    than $580 billion and they are projected to grow to more than
    $900 billion by 2023. In just the first 3 months of this year,
    users are estimated to have spent $21 billion on apps from
    Apple's App Store and around $11 billion on apps from Google's
    Play store. Those are billions, not millions, and that is 40
    percent higher than last year. This is a huge business and it
    is growing and it is growing fast. There is nothing wrong with
    that, but what is wrong is if we do not have competition.
        Users spend about 90 percent of their smart phone internet
    time on apps. Consumers cannot get the same functionality from
    a webpage as they can from an app. When you are tweeting or
    browsing the web or mapping your location or looking at a
    newsfeed or listening to music, you are almost always using an
    app. To put things in perspective, in the first 3 months of
    this year, Americans spent an average of more than 4 hours a
    day, Senator Lee, on mobile apps. Do you think you were higher
    or lower?
        Senator Lee. I plead the Fifth.
        Chair Klobuchar. Okay. Practically all of the apps used by
    consumers today are either preinstalled on Apple devices or
    devices running Google's Android operating system or downloaded
    from Apple's App Store or Google's Play store depending on the
    consumer's device. Apps designed for the iPhone cannot run on
    an Android device and Android apps cannot run on an Apple
    device. There are two separate app ecosystems, Apple's and
    Google's, with each setting all the rules and extracting
    commissions. And consumers choose which ecosystem they want to
    use when they buy their smartphone. If they buy an iPhone, they
    are with Apple for as long as they use that phone. If they buy
    an Android phone, they are with Google for the life of that
    phone.
        As consumers do not replace smartphones very often because
    they are so expensive, app developers who want to reach
    consumers on both types of phone must create two versions of
    their apps, one for Apple and one for Android. The only
    practical way for app developers to reach those customers is
    with the permission of Apple or Google. Unless you are some
    kind of computer hacker, which we hope you are not, the only
    way to download an app onto your iPhone is through the Apple
    App Store. No other app stores are allowed and downloading apps
    directly from the internet to avoid the app store, a process
    known as sideloading, is prohibited by Apple. In every sense,
    it is what we call a walled garden and by design, the App Store
    has a literal monopoly on the distribution of apps on Apple
    devices.
        While Google does allow alternative app stores and
    sideloading on Android, as a practical matter, the overwhelming
    majority of app downloads take place on the Google Play Store,
    making it by far the dominant app store on Android devices.
        Both Apple and Google maintain strict control over their
    app stores. They decide which apps can or cannot exist on their
    app stores and set the rules for how apps operate once they are
    downloaded. As a result, Apple and Google operate as
    gatekeepers with the power to decide how or whether apps can
    reach iPhone and Android users. At the same time, they offer
    many apps that compete directly with those sold through their
    own app stores. Of course, this gatekeeper power can and often
    is used to provide a secure environment in which legitimate
    apps can be distributed to consumers. Today we will focus on
    how Apple and Google can use their power to: (1) exclude or
    suppress apps that compete with their own products; and (2)
    charge excessive fees that affect competition in the app
    economy.
        As I have said before, just because a company creates a
    successful, innovative business that consumers like does not
    give it a free pass to harm competition or ignore our antitrust
    laws. Both companies also offer their own apps that compete
    with the third party apps in their app stores, including video
    streaming apps, music apps, payment apps, gaming apps, and
    more. In some cases, Apple and Google can build the
    functionality of a third party app into their operating system
    or build an app that is essentially a copy. Apple's App Store
    terms explicitly allow them to imitate any of the apps in their
    store, a practice known as ``sure locking,'' which can render
    the original competing app obsolete.
        Both companies also compel app providers that sell digital
    content or services in their app to use their payment process
    services. The companies then charge commissions of up to 30
    percent--that is right--thirty percent for such in-app
    purchases. The apps are not allowed, and this is something that
    people do not know, to inform customers of or link to payment
    methods outside of the app to avoid the commission. In other
    words, consumers are banned from finding out, if they are in
    the app, that they have a cheaper alternative.
        Of course, we acknowledge that most apps are not subject to
    these commissions. Most small developers and most who offer
    apps that sell physical goods or services that will be consumed
    outside the app like rides on Uber do not pay the commission
    and they are probably pretty happy about that. That is fine.
    Focusing high commission on apps that charge for digital
    services used on the iPhone ensures that the commissions target
    the very apps that are most likely to compete directly with
    Apple's and Google's own offerings. Some affected app
    developers are complaining that being forced to use these
    payment services with their high commissions are crippling
    their ability to compete with Apple and Google products on
    equal terms.
        Just because most developers are happy because they are not
    paying commissions, that is fine, it does not inoculate the app
    stores from the antitrust laws if they are harming competition
    with other developers. Some developers have also raised
    concerns about the app store's ability to demote their
    placement in app store rankings, to banish their apps from the
    app store, to withhold or delay approval of app updates which
    can limit app functionality, and to set their own products as
    automatic defaults. And when we talk about incentives, it is
    important to remember that the app stores are not supporting
    businesses that just cover the cost of operating them.
        In 2020, consumers are estimated to have spent $72.3
    billion in Apple's App Store and $38.6 billion in Google's Play
    Store. Applying their standard commission rates to these
    amounts nets Apple and Google billions of dollars. These
    concerns have attracted the attention of enforcers in America
    and around the world. We have seen significant reports on this
    issue from governments in Europe and Australia in addition to
    the House Antitrust Subcommittee's Digital Markets Report.
    There have also been news reports of investigations by the
    Justice Department and State attorneys general into app store
    competition. State lawmakers in Arizona, Massachusetts, North
    Dakota, my home State, Minnesota, and other States have
    proposed legislation to regulate app stores.
        Although we can and should use our existing antitrust laws
    to address these issues, we can also strengthen our laws,
    including with my bill, the Competition and Antitrust Law
    Enforcement Reform Act and the exclusionary portions of that
    bill would be very helpful in taking on these cases.
        We also have to make sure that the agencies have the
    resources to take on these complex matters which have taken me
    quite a few minutes to even get to the guts of explaining this,
    but I thought it was really important to do. You can imagine if
    you are actually taking on the world's biggest companies that
    we have ever known in the world, you actually have to be able
    to have the resources to do that. That is actually tied in with
    this as are all antitrust matters before those agencies. They
    have to have the resources. They just cannot do this with duct
    tape and band aids.
        We all appreciate app stores and the roles that Apple and
    Google have played in helping to create many of the
    technologies that have defined our age. That is great. We are
    not angry about success. We simply want to make sure that
    capitalism keeps going in a strong, strong way that is fair to
    everyone, yes. Capitalism is about competition. It is about new
    products coming on. It is about new competitors emerging. This
    situation, to me, does not seem like that is happening when you
    have two companies really each dominating in different areas
    and when you have companies that are simply trying to do
    business in their own ecosystems or maybe with Apple and Google
    that are severely hampered from doing it.
        With that, I turn it over to Ranking Member Lee and I look
    forward to hearing from the witnesses.

               OPENING STATEMENT OF HON. MICHAEL S. LEE,

                A U.S. SENATOR FROM THE STATE OF ARIZONA

        Senator Lee. Thanks so much, Chairwoman Klobuchar, and
    thanks for holding this hearing. Thanks to all of you for being
    here today.
        The subject of today's hearing, as our Chairwoman has just
    indicated, is an incredibly important one. For better or for
    worse, our smartphones have come to dominate our social and
    economic lives and apps are increasingly becoming the most
    popular way to use those devices to communicate, in many cases
    to make purchases, stay informed, and otherwise manage our day-
    to-day affairs.
        The power that Google, Apple, and few other large tech
    companies hold over the way Americans live their lives is
    itself simply unprecedented. Legislators on both sides of the
    aisle are right to be concerned and right to be interested in
    inquiring into some of these issues.
        One recent example of this power involved the total
    deplatforming of Parler in January. In a matter of days, both
    Apple and Google removed Parler from their app stores just as
    Amazon pulled the plug on Parler's web servers. They did this
    despite Parler's close collaboration with the FBI in advance of
    the January 6th events in order to flag potential events and in
    spite of the much greater prevalence of planning of the
    horrible events of January 6th on Facebook, on Instagram, and
    on Twitter. Both of those apps and their owners, Facebook and
    Instagram being under one ownership and Twitter another, those
    apps remained. Those apps, you know, were allowed to stay on
    while Parler, disfavored by the wilk barons of Silicon Valley
    was just taken down. Millions of voices went silent and one
    potential avenue for competition in this marketplace for social
    media platforms just disappeared into thin air.
        I found this troubling. Not just because this was one
    company that was taken down, but because of the many millions
    of people who had chosen to use Parler were also effectively
    silenced in that. I found it very difficult to get good, clear
    answers or any persuasive answers as to what warranted this
    action other than that they could and other than that they were
    not happy with certain things that happened. Those answers did
    not meaningfully distinguish Parler from other social media
    sites or from other apps.
        I engaged with both Apple and Parler almost immediately to
    try to get to the bottom of this and why it was happening.
    Apple's story seemed to change somewhat over the course of our
    discussions, but I will give Apple and do give Apple credit for
    continuing to work with Parler and eventually reaching a
    resolution that should see Parler return to the app store
    within coming days. All eyes now turn to Google and to Amazon
    to see what they will do. So, like I say, I am very pleased
    with this outcome, but I am as pleased with the outcome in many
    ways as I am very dismayed that it took 3\1/2\ months and the
    intervention of a United States Senator in order to get there.
    It is dumbfounding to me. These are not the actions of
    companies that feel like they have meaningful competition.
        I want to be clear. This is concerning. I am glad they were
    able to resolve this issue to the extent necessary to get
    Parler back on the app store in the coming days, but it does
    make me wonder a number of things. How many small businesses--
    and let us be clear, that is what many apps start out as. In
    fact, most, nearly all, start out as small businesses. How many
    small businesses flounder and die because of potentially
    pretextual restrictions imposed on them arbitrarily by app
    store gatekeepers? How many of them? How many never get off the
    ground? We may never know the true cost of competition and the
    cost to competition itself and to innovation and to consumers.
        I also want to be clear that Parler's deplatforming was
    itself not as far as I can tell an antitrust violation, but it
    might be symptomatic of the immense market power held by a
    handful of tech companies including Apple and Google and Amazon
    and others. When we see this kind of market power being used in
    harmful, if legal ways, it is only fair to ask whether it is
    also being used in illegal ways that might harm competition.
    Sometimes this is what raises the first flags. If you see
    someone acting with wanton disregard for competitive forces
    that might otherwise come into play, what else could be out
    there? If Big Tech is going to take a side in the culture wars
    or in political conversations, Big Tech should be prepared for
    the greater scrutiny that will come with that unfortunate
    choice and with that harmful choice.
        With this in mind, I am real excited to participate in
    today's hearing and to get to the bottom of this really
    pressing question. Thank you.
        Chair Klobuchar. Thank you very much, Ranking Member Lee. I
    want to introduce our witnesses. Our first witness today is
    Kyle Andeer. Mr. Andeer is the chief compliance officer and
    vice-president of corporate law at Apple. Earlier in his
    career, he was an attorney at both the Federal Trade Commission
    and the Antitrust Division of the Department of Justice.
        Our second witness will be Wilson White. Mr. White is a
    public policy and government relations senior counsel on
    Google's Mountain View policy team where he is the global
    public policy lead for the Android, Google Play Payments
    Communications, and Hardware businesses. He also leads on the
    company's global policy strategy for emerging tech issues
    including artificial intelligence, virtual reality, and the
    internet of things.
        Our third witness is Dr. Mark Cooper. Dr. Cooper is
    director of research at the Consumer Federation of America
    where he has responsibility for energy, telecommunications, and
    economic policy analysis. He holds a PhD from Yale and is a
    former Yale and Fulbright Fellow. He is the author of five
    books and numerous articles.
        Next will be Mr. Horacio Gutierrez. Mr. Gutierrez is the
    general counselor and vice-president of business and legal
    affairs at Spotify. He is responsible for overseeing Spotify's
    global, legal, regulatory, and government affairs and serves as
    corporate secretary to its board of directors. In addition, he
    heads Spotify's Global Licensing Operations, a business
    function responsible for commercial licensing activities with
    record labels, music publishers, performance rights, and other
    right holders worldwide.
        Our fifth witness is Kristen Daru. Ms. Daru is the general
    counsel, corporate secretary, and chief privacy officer of
    Tile, Inc. She manages legal and government affairs as well as
    privacy for Tile and serves on its executive leadership team.
    Kristen started her career as a commercial litigator with a
    focus on consumer protection and antitrust defense. Most
    recently prior to Tile, she was chief privacy officer of
    Electronic Arts.
        Our final witness is Jared Sine. Mr. Sine currently serves
    as the chief legal officer and secretary of Match Group where
    he is responsible for all legal compliance and government
    affairs functions for Match Group on a global basis. Prior to
    joining Match Group, he worked for Expedia as vice-president
    associate general counsel where he oversaw all legal aspects of
    Expedia's mergers, acquisitions, joint ventures.
        I want to thank the witnesses for appearing today and I
    look forward to hearing your testimony. If the witnesses now
    could stand and raise your right hand, including our remote
    witnesses.
        Do you swear that the testimony you will give before the
    Subcommittee will be the truth, the whole truth, and nothing
    but the truth so help you God?
        Witnesses. I do.
        [Witnesses are sworn in.]
        Chair Klobuchar. Thank you. You will be seated and we will
    begin with you, Mr. Andeer, for a 5-minute testimony. Thank you
    very much and thank you for appearing remotely.

               STATEMENT OF KYLE ANDEER, CHIEF COMPLIANCE

                 OFFICER, APPLE, CUPERTINO, CALIFORNIA

        Mr. Andeer. Chairwoman Klobuchar, Ranking Member Lee, and
    Members of the Subcommittee, my name is Kyle Andeer, and I am
    Apple's chief compliance officer. I appreciate the opportunity
    to offer testimony about Apple's App Store.
        Some of you may have an iPhone with you right now. I hope
    that is the case because we believe our products deliver the
    best possible customer experience. To do that, we work
    constantly to innovate. The App Store is one of our most
    important innovations. It is a critical feature of iPhone,
    providing customers access to nearly two million apps, allowing
    you to hail a ride, order dinner, listen to music, and so much
    more, all from your iPhone.
        Amazing as that is for our customers, I think the App
    Store's real success is the opportunity it has created for
    software developers to build and distribute all those apps in
    the first place. Today an entrepreneur with a great idea can
    use the App Store to build an app and instantly reach customers
    across the entire world all from her home. It is easy to take
    that for granted, but it was not always this way. When we
    introduced the App Store in 2008, creating software was
    difficult and often expensive. Developers had to pay for the
    tools they needed to build and test their products. Then they
    had to distribute it, either over the internet, which had trust
    and security issues, or through physical disks, which require
    costly shelf space in brick and mortar stores. It is a little
    wonder that options were fairly limited and expensive back
    then. The App Store changed all of that. It truly
    revolutionized software distribution.
        First, the App Store is curated. iPhone is not just a
    phone. It contains some of your most sensitive information--
    photos of your kids, financial and health information, and the
    controls to your home security system. And because of that, bad
    actors from around the world try to infiltrate devices using
    malware. That is like a Trojan horse that tries to get into
    your phone and wreak havoc. We will not tolerate that. We
    review every app in the App Store to make sure it meets
    standards for privacy, safety, security, and performance. Each
    week, we review about 100,000 submissions and we reject about
    40 percent of them because they do not meet those standards. We
    know that our approach works. Study after study shows that the
    iPhone has fewer malware infections than any other device in
    the marketplace.
        Second, we have invested significantly to provide
    developers the tools that they need to build apps. That
    includes over 250,000 application programming interfaces that
    help unlock the magic of the iPhone. Because of that, a
    developer can build apps that let you deposit a check by taking
    a picture of it, play a game or listen to music with iPhone's
    audio and video technologies, or get directions using GPS.
    Apple built those and so many other capabilities into iPhone
    and now developers can leverage them for their apps.
        The App Store is not just a store. It is like a studio
    stocked with canvasses, brushes, and paint, the tools that
    artists need to create their works. It is a gallery where they
    can display and sell their creations. That is how the App Store
    empowers everyone to build apps, from elementary school kids to
    small businesses, not just the big guys.
        Third, the App Store is a great value for developers. The
    developer keeps 100 percent of the money she makes for the vast
    majority of apps on the App Store, about 85 percent of them.
    The commission charged to other developers, those selling
    digital goods, initially was set at 30 percent, which is a
    competitive rate today and a far cry from the rates charged for
    software distribution when the App Store was launched 12 years
    ago. Since then, we have never raised the commission. We have
    always lowered it, as we did against last year for small
    businesses. Today the commission is almost always just 15
    percent in those instances when it is required.
        We are proud of the store we have built, the jobs it has
    created, and the economic opportunity it has supported. It is
    the sort of thing that is possible when competition is fierce
    and fair. Apple, after all, was started by tinkerers and
    dreamers and we became successful over time because we had an
    opportunity to compete. We were in a street fight back then and
    we still are today. We like it that way because we know that
    competition spurs innovation, and with it, more and better
    choices for customers.
        Thank you for the opportunity to participate today and I am
    happy to answer any questions you might have.
        [The prepared statement of Mr. Andeer appears as a
    submission for the record.]
        Chair Klobuchar. Thank you very much, Mr. Andeer.
        Next, Mr. White with Google.

               STATEMENT OF WILSON WHITE, SENIOR DIRECTOR

           PUBLIC POLICY & GOVERNMENT RELATIONS, GOOGLE, INC.

                       MOUNTAIN VIEW, CALIFORNIA

        Mr. White. Chairwoman Klobuchar, Ranking Member Lee, and
    distinguished Senators of the Committee, thank you for inviting
    me here today to discuss the Google Play ecosystem and the
    benefits it provides to millions of American consumers and
    developers.
        My name is Wilson White and I am a senior director on the
    Government Affairs & Public Policy team at Google. In my
    testimony today, I will describe: (1) how Android and Google
    Play work; (2) the ways in which they have contributed to
    competition and choice; and (3) how we fund and sustain the
    continued evolution of Android and Google Play while helping
    developers and consumers.
        First, at Google, we believe that everyone should have
    equal access to the benefits of mobile devices and we designed
    Android and Google Play with freedom, openness, and
    accessibility in mind. Since Android is an open source
    operating system anyone, including competitors, are free to use
    it without any requirement to preinstall or download Google's
    apps or other services. Thousands of companies including
    Peloton and JetBlue's in-flight entertainment system use the
    Android operating system to build their technologies and their
    businesses. Device makers and carriers are free to use Android
    without Google Play or Google's other services. Many of them
    actually choose to preload Google's apps alongside their
    competing apps. In fact, more than half of Android devices come
    preinstalled with more than one app store. This openness has
    proven enormously valuable to device makers because it allows
    them to invest in other ways, innovate in other ways, without
    having to devote resources to building an operating system.
        Similarly, the availability of third-party software is
    important to ensure that mobile devices meet consumer's
    expectations. A consumer selecting between competing mobile
    devices needs to understand whether their favorite apps and
    games will be available and actually work on those devices.
    That is where app stores come in.
        In 2012, we launched Google Play as our vision for an ideal
    Android app store. We have a consumer experience, an online
    storefront where consumers come to find their best apps and
    games and a developer experience with app development,
    distribution, commerce, and performance analysis tools that
    help developers build better apps and to grow their businesses.
    Through freedom, openness, and accessibility, today Android and
    Google Play are the foundation of a thriving and competitive
    device and app ecosystem. Android is available on 2.5 billion
    devices around the world. Google Play has 2 billion 30-day
    active users. Millions of companies rely on these platforms to
    reach consumers around the globe.
        Second, Android has increased competition and choice across
    the ecosystem. Because of Android, today a consumer selecting a
    mobile device is not limited to one or two or even a handful of
    alternatives. More than 1,300 companies build Android devices
    and there are more than 24,000 different Android device models
    to choose from. Some of these Android devices cost less than
    100 bucks, which has made computing more accessible to
    communities that have not been well-served by the tech
    platforms in the past.
        Third, our business only succeeds when our developer
    partners succeed and consumers view us as a trusted destination
    for digital content. More than 90 percent of the apps on the
    Google Play store are free to consumers. We do not charge for
    the range of services that Google Play provides unless it
    results in a sale of digital content for a developer. Even
    then, only if that sale occurs within the app itself. We
    believe this business model supports entry and innovation.
        When our standard fee does apply, it covers everything from
    essential security updates, managing app installs, and a vast
    array of developer tools to help developers build and to
    maintain a global marketplace. It also reflects the investment
    that we make in the platform itself. For example, we employ
    approximately 9,000 people who are dedicated to Android and
    Google Play. This fee is also competitive with industry
    practices that existed long before Google Play was built. Many
    PC and console, physical and other app stores charge similar
    fees. Just a few weeks ago, we announced that we were reducing
    the fee to 15 percent on the first $1 million that all
    developers earn on Google Play, regardless of those developers'
    sizes.
        With this change, 99 percent of developers will see a 50
    percent reduction in their service fees. We believe the value
    proposition for Google Play is a strong one. If a developer
    does not agree that the value proposition is adequate, the
    openness of Android allows those developers options to display
    and distribute their apps through other means, either directly
    to consumers or via other app stores. Creating a global
    platform with access to all and providing tools for developers
    has always been our goal since we launched the very first
    Android device. We are proud that our bet on openness has
    resulted in success for all involved.
        We appreciate the Committee's interest in these important
    issues and I look forward to answering your questions.
        [The prepared statement of Mr. White appears as a
    submission for the record.]
        Chair Klobuchar. Thank you very much, Mr. White. Next up,
    Dr. Cooper.

                    STATEMENT OF MARK COOPER, PH.D.,

               DIRECTOR OF RESEARCH, CONSUMER FEDERATION

                       OF AMERICA, WASHINGTON, DC

        Dr. Cooper. Madam Chairwoman, Members of the Committee, my
    name is Dr. Mark Cooper. I am director of research at the
    Consumer Federation of America. We appreciate the opportunity
    to testify today. This may be the most important effort to
    reform antitrust in the four decades that I have been analyzing
    it for the CFA. I draw on three articles in my comments which I
    have submitted for the record. They outline the problem which
    remarkably the Chairwoman's description of the practices were
    all illegal in the Microsoft case. That is the standard that we
    should be applying today and enforcing.
        Digital communications is dominated by platforms using and
    abusing market power to undermine competition. Six years ago,
    we concluded that one primary goal of public policy in a
    dynamic digital economy is to ensure that market power that is
    inherent in platforms does not hinder or diminish the
    competition for goods and services and applications that can
    ride on those platforms. We have the model in hand, bright
    lines behind which entrepreneurial experimentation is unleashed
    and strong antitrust principles to constrain market power.
        The great challenge, of course, is where do you draw that
    line. How do you find a set of policies that recognize that
    there are innovative companies developing platforms and there
    are competitors who would like to develop applications?
        We know that companies are innovative and these companies
    here and on the tv are innovative. They are seeking innovative
    rents, sometimes called Schumpeterian rents because they
    disrupt business and they create needs and wants that they then
    meet in increasingly consumer-friendly ways. However, there
    tends to come a point in the development of these industries
    where instead of chasing Schumpeterian rents, they begin to
    chase what I call Rockefeller rents. Those are the rents that
    accrue to firms that build bigger moats around their businesses
    and lock consumers in while they lock competitors out.
        An analysis by the Stigler Group Center at University of
    Chicago lists three dozen challenges to antitrust in the
    digital age. The irony is that the first 10 represent positive
    economic benefits of digital production and distribution. Those
    are the innovations we need to foster, but the existence of
    those innovations does not justify the two dozen
    anticompetitive sets of practices that have grown up around
    them.
        Congress should, in fact, set goals, provide authority,
    give power and resources to the expert agencies. Under close
    congressional oversight, the agencies will get the job right.
    However, if Congress tries to draw lines and pick winners and
    losers, there is a good chance that the winner they pick today
    will be a loser tomorrow and then we have to get Congress to
    act again. That is not so easy to do. Congress should clear
    away the thicket of mergers and abusive practices, the decades
    of antitrust malpractice, and shift direction. It should put
    all of the suspect practices and mergers on the table and
    empower the agencies to figure out who is doing what to whom
    and quickly resolve those problems.
        The specifics that I support in my testimony include the
    following: nondiscriminatory interconnection and carriage which
    equals open application interfaces in the digital economy, deep
    suspicion of proprietary application interfaces, a presumption
    that they are illegal and severe risk to those platforms that
    rely on proprietary interfaces. Fair, reasonable, and
    nondiscriminatory rates, terms, and conditions for access.
    That's FRAND, an expression you will hear in antitrust. The
    demand side is as important as the supply side. If we cannot
    get the customers, it does not matter how many apps we can
    develop as long as if we cannot win the business. We need to
    have the equivalent, which is true consumer sovereignty on the
    demand side.
        Consumers must have opted in, not opted out. No presumption
    of what the default is. Give me the chance to choose. Equal
    single click choice. Provision of neutral information. Clear
    description of the information that is collected and how it is
    used. Some limitations on the types of informations collected
    and the targeting of groups for that information. Those are the
    principles, approximately ten principles, that need to govern
    this space if it is going to be consumer-friendly and
    competitive.
        Thank you.
        [The prepared statement of Dr. Cooper appears as a
    submission for the record.]
        Chair Klobuchar. Thank you very much, Dr. Cooper. Next, Mr.
    Gutierrez.

                STATEMENT OF HORACIO GUTIERREZ, HEAD OF

             GLOBAL AFFAIRS & CHIEF LEGAL OFFICER, SPOTIFY,

                           NEW YORK, NEW YORK

        Mr. Gutierrez. Chairwoman Klobuchar, Ranking Member Lee,
    and Members of the Subcommittee, thank you for the opportunity
    to testify today on behalf of Spotify.
        My message is simple, stark, and urgent. We believe all
    businesses including Spotify should work hard to earn the favor
    of consumers through fair and square competition in the
    marketplace based on better, more innovative products offered
    at attractive prices. Apple abuses its dominant position as the
    gatekeeper of the App Store to insulate itself from competition
    and disadvantage rival services like Spotify. Apple's anti-
    competitive conduct hurts consumers with higher prices, less
    innovation, and less choice.
        Our market moves at internet speed and legislative action
    is urgently needed to give antitrust enforcement agencies the
    tools they need to prevent gatekeeper platforms like Apple from
    abusing the power of their platform. Unless decisive
    legislative and enforcement action is taken, other gatekeeper
    platforms inevitably will follow Apple's example resulting in
    further concentration of power in the hands of a handful of
    digital sovereigns.
        Fifteen years ago, Spotify pioneered a streaming audio
    service that today enables our 345 million customers to hear
    the music and podcasts they want anywhere at any time. Apple
    Music is one of our principle competitors. Its advantage is not
    better service. Instead, it is Apple's total control over the
    App Store, which allows them to impose rules that disadvantage
    Spotify and benefits Apple's own service.
        Some may not remember this, but iPhones were not that
    popular when first introduced. Apple soon realized that the
    iPhone would not succeed if it only offered Apple's proprietary
    apps. It invited third-parties to develop apps for the iPhone
    and opened the App Store. Apple, therefore, has things exactly
    backward when it claims that companies like Spotify are free
    riding on Apple's innovations. It is Apple's success that rode,
    in large part, on the creativity of third-party app developers
    that created demand for Apple's devices. And the proof is
    Apple's own slogan, ``there's an app for that,'' which is used
    to drive sales of Apple devices.
        How did Apple show its gratitude for app developers' help?
    By doing a classic bait-and-switch. They waited until tens of
    millions of device owners were locked into the iPhone before
    changing the App Store rules to impose burdens on app
    developers that compete with Apple's own applications. Apple
    has a decade long history of using App Store policies to
    handicap Spotify and benefit Apple Music. It forced us to
    choose between two bad options: accepting Apple's illegal tie
    of its proprietary payment system and paying Apple's 30 percent
    tax, which would have forced us to raise consumer prices and
    made our service more expensive than Apple Music, or accept a
    gag order, prohibiting our communication with our own customers
    so that we cannot tell our users about the existence of our
    premium service and discounts and promotions available to first
    time subscribers.
        It does not take a Ph.D. in economics to recognize that
    this abuse of conduct hurts consumers by depriving them of
    information about a product that competes with Apple's. Apple's
    anticompetitive intent is clear from the fact that it targets
    businesses that are or might become Apple's competitors in
    downstream markets. The rules apply to companies that offer
    online gaming, music and video streaming, access to ebooks, but
    companies like Uber, Starbucks, Ticketmaster, and Walmart are
    exempt.
        Apple argues that these rules are indispensable to the
    safety and privacy of users, but how can they be indispensable
    when they do not even apply to 85 percent of the apps in the
    App Store that are exempt from Apple's ``restrictions?''
    Apple's explanations are cynical pretexts. These restrictions
    are nothing more than an abusive power grab and a confiscation
    of the value created by others. Even Microsoft in the heyday of
    the Windows PC operating system did not demand a cut of 30
    percent of the revenues of competing browsers and media
    players.
        Legislative action is urgently needed to stop these illegal
    power grabs. We welcome the broad antitrust reform proposed by
    Chairwoman Klobuchar along with Senators Blumenthal and Booker.
    Senator Hawley recently proposed a bill with a number of
    similar and very important reforms. These reforms are essential
    to equip enforcement agencies with the tools they need to
    remedy the market and consumer harms that result from these
    platform abuses.
        Thank you and I look forward to answering your questions.
        [The prepared statement of Mr. Gutierrez appears as a
    submission for the record.]
        Chair Klobuchar. Very good. Thank you very much. Ms. Daru.

                       STATEMENT OF KRISTEN DARU,

                      GENERAL COUNSEL, TILE, INC.,

                         SAN MATEO, CALIFORNIA

        Ms. Daru. Thank you to the Subcommittee and to your
    dedicated staff for convening this critical hearing. My name is
    Kristen Daru, and I am the general counsel of Tile.
        Tile helps people find lost items. Our devices work with
    the Tile app to help people find their keys, wallet, purse,
    really anything. We also embed our technology into third-party
    products like headphones, laptops, and wearables. We are a
    small company with only--with less than 150 employees, but we
    have pioneered this category and found success even in the face
    of significant competition ranging from other start-ups to
    Fortune 50 companies.
        Much of our success relates both to world class features
    and a commitment to both privacy and importantly,
    interoperability. We believe consumers should have a seamless
    finding experience across any platform including Android and
    iPhone.
        Originally, we had a symbiotic relationship with Apple. We
    launched our iOS app in 2013. They sold our devices in their
    retail stores and they even featured us on stage at their
    worldwide developer conference in 2018. That all changed when
    Apple decided that it wanted to take over this category. To be
    clear, we welcome competition, but it has to be fair
    competition. Apple's idea of competing is patently unfair and I
    will give you some examples.
        With iOS 13, Apple introduced a new FindMy app that had
    Tile features. It is basically their version of Tile. FindMy is
    installed by default on all iPhones. At the exact same time,
    Apple made changes to its operating system that denigrated our
    user experience and made it really hard for our customers to
    activate their Tiles, but they left FindMy streamlined and on
    by default. Apple reserved troves of critical information for
    use exclusively in FindMy and not competing apps.
        Of course, yesterday, Apple announced the launch of their
    competing hardware product, the AirTag. AirTags will make use
    of a technology called ultrawide band, or UWB. It is a
    nonproprietary technology in the same way that Bluetooth is.
    Whereas Bluetooth can tell you in what room your item is
    located, UWB can tell you exactly what pillow it is under.
    Apple first included UWB chips in its iPhone 12, and since
    2019, we have made many requests to access that chip so that we
    can use it for the benefit of our customers.
        In fact, we made an amazing experience using augmented
    reality with UWB where you can use your phone and see exactly
    where in the room, what pillow your keys are located under.
    Apple refused our requests and therefore we cannot bring that
    innovation to the market for the benefit of our customers. Yet,
    the AirTag is going to use UWB because Apple has decided to
    reserve its use exclusively in its product.
        If that were not enough, 2 weeks ago Apple confirmed that
    it is about to go live with something called the FindMy Network
    Accessory Program, which the House has already found to be
    anti-competitive. The program was originally touted in the
    media as a pro-competitive concession to Tile's concerns,
    giving our customers access to the troves of location data
    otherwise reserved for FindMy. Not so. In order for our
    customers to get that benefit, we have to give Apple
    unprecedented control over our business and direct our
    customers to the FindMy App to find their lost items.
    Basically, the FindMy program holds critical data hostage to
    coerce developers like Tile to abandon our apps and our
    networks. It deprives customers of choice and importantly, it
    breaks our interoperability.
        This is not surprising. In the Epic litigation, an Apple
    employee named FindMy Friends as part of an Apple strategy to
    decrease interoperability to lock customers into its ecosystem.
    It seems as though FindMy is part of Apple's ongoing plan to
    turn iOS to a Hotel California where you can check in anytime
    you like, but you can never leave. It is working. One of our
    competitors has actually announced that its newest devices will
    be available exclusively within FindMy to the exclusion of its
    own app.
        Apple, of course, claims that all of these actions are
    necessary in the name of privacy. That is not true. Privacy and
    fair competition are not mutually exclusive. Apple could easily
    define requirements to allow us all to play on the same field,
    but Apple does not do that. Apple uses privacy as a blanket
    excuse to subject competitors to different rules. This is what
    happens when you have a monopolist acting as a de facto
    regulator. The regulations will always favor the monopolist. If
    Apple turned on us, it can turn on anyone. Apple has
    demonstrated it will not change unless someone makes them.
        The legislative answer is simple. If Apple chooses to
    compete against developers on its platform, it should just do
    so fairly and according to the same rules. Regulating a giant
    like Apple will not be easy, but it is just going to get harder
    as it gets bigger and more powerful. Starting with an App Store
    antitrust reform bill to address some of these known abuses
    will be an important first step to ensure lasting innovation
    and competition in this country.
        Thank you for your time.
        [The prepared statement of Ms. Daru appears as a submission
    for the record.]
        Chair Klobuchar. Thank you very much.
        Next, Mr. Sine. Last, but not least. Thank you.

                        STATEMENT OF JARED SINE,

                    CHIEF LEGAL OFFICER & SECRETARY,

                    MATCH GROUP, INC., DALLAS, TEXAS

        Mr. Sine. Madam Chair, Ranking Member Lee, and Members of
    the Committee, thank you for your bold leadership in advancing
    this important public debate. Apple and Google have used their
    monopoly power to redirect the meritocracy of the free,
    competitive, and innovating information superhighway to run
    primarily through the toll gates of their app store monopolies.
    They have systematically programmed users to seek out the app
    for that, and if you do not have an app, you might as well not
    exist.
        Let me be clear. Apple and Google are the only gatekeepers
    of this new internet, using user data and app developer's
    innovations and even income against them in order to bankroll
    the construction of massive tollways on the formerly free
    information superhighway. At the heart of this strategy to
    control developers and consumers is the requirement that app
    developers use Apple's and Google's in-app payment services or
    credit card processor, for which they charge a whopping 30
    percent tax.
        Do not take my word for it. The late Apple CEO, Steve Jobs,
    devised this strategy. Back in 2010, Apple grew wary that it
    was far too simple for users to switch between iOS and Android
    devices because app developers were allowing users to buy
    services directly from them that could be used readily on
    either platform. His directive was simple. Let us force them to
    use our payment system. He knew that once users paid through
    Apple and not the app developer, they would be locked to
    Apple's ecosystem, tying their purchases to their iOS devices
    and forcing app developers to hand over the lifeblood of their
    businesses, their customers relationships.
        Let me share just two examples of our experiences that
    unequivocally demonstrate the monopoly power of these app
    stores. Shortly after Google launched the Google Play store,
    they persuaded us to join the Android ecosystem under the false
    pretenses of an open platform where we would not be required to
    use Google's payment processor or pay the 30 percent tax. Now,
    years after helping them establish their app store monopoly by
    bringing our apps and our customers to the Play store, Google
    is leveraging its monopoly power to change the rules, tying its
    in-app payment system to our access to the Play store starting
    in September of this year.
        Not to be outdone, Apple has been equally authoritarian. A
    few years back, Match wanted to institute ID verification rules
    in our Taiwanese app that mirrored those already required in
    Japan. Apple rejected our app. Perplexed, I personally
    contacted the App Store's head lawyer to explain why this was
    the right thing for our business and why it kept our users
    safe. I was told in no uncertain terms that he disagreed with
    our assessment of how to keep our users safe. He added that we
    should just be glad that Apple is not taking all of Match's
    revenue, telling me, ``you owe us every dime you have made.'' I
    was floored.
        Senators, this is not curation, as we have been told. It is
    iron fisted monopoly control. When an industry player has the
    power to dictate how apps operate, how much they will be forced
    to play, and in many cases, if they will even survive, it is a
    monopoly. This is the same behavior of the robber barons before
    them. It is no wonder that so few companies have been willing
    to stand up and testify against these monopolies. Would you
    take that risk if you were a small business?
        These monopoly activities result in many harms to app
    developers and consumers, but I will focus specifically on
    four. First, safety is actually harmed in the current system.
    Because of Apple's and Google's stranglehold on consumer data,
    it is difficult for us to even conduct the most basic safety
    checks for our apps. For example, despite multiple requests
    over the years, Apple and Google still allow underage users to
    download our apps, even when they know they are under 18. Apple
    and Google actually make it harder for us to keep our users
    safe.
        Number two, Apple's and Google's in-app payment rules force
    users to hand over massive treasure troves of their most
    sensitive data which these tech titans can use to enrich their
    own products or develop their own competing digital services
    nearly overnight and charge 30 percent less.
        Number three, the app store tax. Today instead of there is
    an app for that, Google's and Apple's practices could be better
    described as there is a tax for that. The 30 percent tax levied
    on every digital transaction increases costs on consumers and
    developers alike. For Match, these app stores fees are our
    single largest expense, eclipsing half a billion dollars
    annually. That is $500 million that could be going back into
    the pockets of everyday employees, or excuse me, everyday
    consumers, or deployed to hire employees or invested in new
    innovations.
        Number four, incentivizing the monetization of selling user
    data and reducing innovation. Apple and Google essentially push
    developers to adopt a less privacy-friendly business model,
    incentivizing them to avoid mandatory in-app payment by
    operating more like Facebook, where consumer data is the
    commodity and monetized. Additionally, by removing competition
    in the payment space, innovation is harmed. When the veneer of
    their safety, security, and privacy arguments shatter under the
    weight of scrutiny, Apple and Google respond that they built
    the platforms and should be able to decide what business models
    they use.
        Members of the Committee, I submit that the railroad
    companies build the railroads. The steel companies built the
    steel mills. The telephone companies built the telephone lines.
    The creators of all of these incredible innovations each made
    the same arguments at different times. It did not justify a
    monopoly then and it should not today. Thank you and I look
    forward to answering your questions.
        [The prepared statement of Mr. Sine appears as a submission
    for the record.]
        Chair Klobuchar. Thank you very much. That was very
    powerful, Mr. Sine, as was all the witnesses before us.
        Let me start out here with you, Mr. Gutierrez. Both Apple
    and Google charge app developers a 30 to 15 percent commission
    fee for processing in-app purchases of digital services. Both
    companies point out that the majority of apps do not pay any
    payment processing commission because they are free apps or
    because they are selling nondigital products or services, but
    many of those who must pay the commissions find them duly
    burdensome. I am concerned that these commissions can be used
    to suppress competition when they raise the cost of app
    developers that compete with the apps or other products or
    services that are offered by the app store operator.
        Spotify has raised concerns about the competitive impact
    about these commission fees. Can you describe the effect of
    these in-app commission fees, what effect it has had on
    Spotify's ability to compete? Can you just pass these fees on
    to consumers?
        Mr. Gutierrez. Thank you, Senator. Thank you for your
    question. There was a time in which, under pressure from Apple
    we had to implement Apple's in-app payment service, and as a
    consequence of that, had to start paying the 30 percent Apple
    tax. The consequence of that in a business like ours, where so
    much of our revenue has to go to pay for the licensing and
    content from artists and music labels and others, is that, in
    fact, we had no choice but to increase our price to be able to
    afford the 30 percent tax that Apple was imposing on us. We had
    to raise our consumer prices from a monthly subscription of
    $9.99 to $12.99.
        Unbeknownst to us, as Apple was putting pressure on us to
    do that, Apple was in the process of acquiring Beats Music,
    rebranding it as Apple Music, and then just a couple of months
    after we had to increase prices, Apple launched Apple Music at
    $9.99, which meant they were now undercutting us on price
    because we had to pay the 30 percent tax to Apple. Faced with
    this reality in which Apple was now putting us in this
    uncompetitive situation from a consumer price perspective, we
    had no choice but to take the IAP functionality now.
        What followed after that was a series of steps on the part
    of Apple threatening us to kick us out of the App Store. Just
    imagine the power of a threat on the part of a platform like
    Apple to take you out of the App Store, what that might mean
    for your business. A number of steps in which they not only
    said it was not enough for us not to provide a link to a
    payment mechanism, but we could not even tell users that there
    was a subscription option and that there were discounts that we
    were offering that would make the product cheaper. This gag
    order, in terms of the communication with our own customers,
    makes it incredibly hard for us to persuade the user of a free
    app to upgrade to a subscription app, which is, frankly, in a
    premium model like ours, how the business can work and how the
    creators that put their content on our platform can be fairly
    compensated. This is a very clear----
        Chair Klobuchar. Okay. Okay. I am going to keep going. It
    is an amazing story and at some point I will go to Mr. Andeer
    here to explain this, but there is another piece of this is
    that not only are you charged these fees and you are forced to
    pass them on when you do not want to, but it is my
    understanding that the app stores bar app providers like
    Spotify from telling your customers through the app that your
    services would be cheaper if they could directly buy them
    online. If those marketing bans were eliminated, what would you
    tell your users and how do you think it could affect them?
        Mr. Gutierrez. That is a super important issue because our
    communication with our user is the way in which we get them to
    know about the opportunities they have about subscription. If
    we cannot do that, then we cannot make the premium model work.
    Apple knows that because they are in the business. They know
    exactly the importance of that.
        Chair Klobuchar. Okay. Alright. Alright. Mr. Sine, Match
    had a program which you testified about or which called T-
    Mobile Tuesdays that offered discounts through T-Mobile's app.
    Is that right?
        Mr. Sine. That is correct.
        Chair Klobuchar. Apple shut it down as I understand it. Is
    that right?
        Mr. Sine. That is correct. They blocked T-Mobile's app.
        Chair Klobuchar. Okay. If Apple changed its rules to allow
    Match to offer discounts would you do so and how would that
    work?
        Mr. Sine. One hundred percent. We actually already offer,
    for example, in our Tinder app if you subscribe through the
    website you get a discount relative to what you would pay in
    the app, so that already exists. We would 100 percent take
    advantage of that if we could.
        Chair Klobuchar. Okay. Ms. Daru, you testified that Apple
    essentially copied Tile's app and took steps to undermine
    Tile's functionality by changing the iPhone operating system to
    favor their competing product and by limiting Tile's access to
    data. Yesterday Apple announced the launch of a new product
    that looks a whole lot like Tile. Can you elaborate on the ways
    in which Apple's conduct has reduced Tile's ability to compete?
        Ms. Daru. Absolutely and thanks for the question. All of
    these actions really started when it became known to us that
    Apple was going to enter the market and attempt to take it
    over. Really what they did was with the exact same operating
    system update that they introduced the new FindMy app, they
    took away one of our critical permissions which requires our
    customers to go deep, deep, deep into their settings to turn
    Tile on. FindMy, by contrast, is on by default through the--
    when you set up your operating system. In order to turn it off,
    you have to go deep into your settings and actually enter a
    password.
        Apple also started serving prompts with that same update to
    our users. Once they figured out how to turn Tile on, they
    started serving these prompts encouraging them to turn Tile
    off, but they did not serve up those prompts for FindMy.
        Our Bluetooth network, of course people need to opt-in to
    the Bluetooth network. I think that is great. We are complete
    supporters of consumer transparency, but the FindMy Bluetooth
    network in the new FindMy app is on by default.
        Then with the AirTags, as I discussed, we have the UWB
    issue which I will not repeat, but there is something else. It
    is something they call the magic onboarding flow. To connect
    your AirTags with your phone, you do not even have to open the
    FindMy app. You just put them near, but that magic flow is not
    available to third parties like Tile.
        In addition to all of that, Apple launched this product and
    its competing app with a knowledge of a lot of information
    about our business. They know our retail take rates. They know
    our retail margins. They know how our devices do in stores.
    They know who our customers are. They know our subscription
    take rates. They know what features people use. I mean the list
    goes on and on and that is another concern. Thank you.
        Chair Klobuchar. Okay. Thank you. Alright. One of the
    things I have noticed as we have talked to people affected by
    all of this and the commission fees and the like, they have
    come forward. A lot of them--I am not going to give their names
    publicly because they are actually afraid to testify. I guess I
    do not blame them because they feel that it is going to hurt
    their business. They are going to get intimidated. You
    mentioned, Mr. Gutierrez, I am not asking you this question.
    Some of the retaliation you thought that you felt you
    experienced for coming forward.
        Mr. Sine, have you have any examples of retaliation for
    coming forward?
        Mr. Sine. Senator, we have had outreach with respect to our
    coming forward for sure.
        Chair Klobuchar. By who?
        Mr. Sine. By Google.
        Chair Klobuchar. What happened?
        Mr. Sine. They called us last night after our testimony
    became public to ask us why our testimony was different than
    what we had said about the situation in our earnings call
    earlier this year.
        Chair Klobuchar. Is it different?
        Mr. Sine. We had said in our earnings call earlier this
    year was that we believed we would be able to work through the
    issue of Google imposing their 30 percent on us, which we have
    been working very hard at over the last few years meeting with
    regulators and others to try and change these practices and
    ensure this from not happening. Google actually first
    threatened us in 2017 that they would roll out this in-app
    payment requirement to us and they have slow rolled that until
    they announced it last September.
        Chair Klobuchar. I am just picturing this compared to
    Australia where they threatened to cutoff a whole country
    simply because they wanted to charge for content. If you were
    to somehow keep experiencing retaliation, I would assume there
    is--I do not want to keep going into my time. We have several
    Senators here--three more. Another one on the way. I just want
    to know could they hurt you in little ways that it would be
    really hard to detect?
        Mr. Sine. They could hurt us in little ways. They could
    hurt us in big ways. They could easily remove our app. They
    could, again, as they are doing, impose the 30 percent tax that
    they had never imposed on us before. There are many, many ways
    they can hurt our businesses. We are all afraid is the reality,
    Senator. We are fortunate you are listening to us today.
        Chair Klobuchar. I hope the Justice Department is too.
        Mr. White, why did someone from your company call Mr. Sine?
    You know, Match is a major competitor here in the market. We
    all know who they are. Why did they do that last night?
        Mr. White. Thank you, Senator, for the question. Not only
    is Match is a competitor, Match is a major partner of ours, a
    very valued partner of ours. My understanding based on what Mr.
    Sine said is it sounds as if some business development folks
    who are working on commercial conversations had a conversation
    and asked a honest question of why sworn testimony was
    different from what was stated in a public earnings call. I
    respectfully do not view that as a threat and we would never
    threaten our partners, Senator.
        Having developers choosing to distribute through Google
    Play is core to our business. The idea that we would threaten
    partners who actually share in the success that we have as a
    platform is the antithesis of how we carry out business,
    Senator.
        Chair Klobuchar. Okay. My last question. We will have
    another round. Mr. Andeer, this is about some of the things
    that Ms. Daru talked about. Does Apple's developer agreement
    authorize Apple to use an app developer's confidential
    technical and business information to create apps that compete
    against the developer?
        Mr. Andeer. Senator, no, it does not. We compete on the
    merits. We have looked at different products, different
    markets, and we ask ourselves time and time again what can we
    do different. What can we bring that is unique and special to
    the marketplace? I think AirTags is one of those products. We
    think it is a very different product than anything else that is
    out there. We are super excited to launch this product
    tomorrow. I think if you will look at it, it is extremely
    different than anything else in the marketplace. We are doing
    it the same time as opening up the FindMy network so we can see
    third-party innovation grow.
        I mean currently this market is dominated by Tile with 80
    to 90 percent of the market, so we think we are going to see a
    lot more competition thanks in part to the product that we are
    launching tomorrow, but also importantly, by opening the FindMy
    network to all the third parties that are out there and are
    really excited to bring products to the marketplace.
        Chair Klobuchar. Do you use any non-public information or
    data from the App Store? Did you copy anything from Tile?
        Mr. Andeer. Senator, I appreciate the question. Absolutely
    not. We did not copy Tile's product. We did not copy Tile's
    application. I think if you look at the AirTags that will be
    released tomorrow, if you look at the FindMy application, you
    will see that this is a very different product, a very
    different experience than what you see with Tile. We are
    excited to compete and offer that choice to our consumers.
        Chair Klobuchar. Why do you have to charge 30 percent to
    Spotify?
        Mr. Andeer. Senator, I appreciate the opportunity to
    respond to that. The fact of the matter is that Spotify has
    grown an incredibly successful business. To their credit, they
    are incredibly innovative, incredibly aggressive when it comes
    to dealing with artists and creators and driving a hard
    bargain. They equally drive a hard bargain with distributors.
    They built the market leading, dominant music streaming
    business in the world.
        In terms of subscribers, they have 155 million subscribers
    around the world. Tens of millions of those are on the iPhone.
    Less than one percent pay a commission to Apple. In fact, they
    are only paying a 15 percent commission. The price that Mr.
    Gutierrez mentioned in terms of increasing it by 30 percent,
    guess what? They have never reduced that price once for their
    consumers. Hey, they are a great company. They push us to
    compete each and every day, but I respectfully think we are
    offering choice and options to our consumers.
        Chair Klobuchar. Uh-huh. I am just thinking they did not
    bargain for that much money of 30 percent. I am going to turn
    it over to Senator Lee.
        Senator Lee. Thank you, Madam Chair.
        Ms. Daru, let us start with you. You talked a little bit
    about AirTag. By the way, I have used your product. It is a
    fantastic product.
        Ms. Daru. Wonderful.
        Senator Lee. Very helpful to a lot of people. I want to
    make sure I understand this correctly. Did Apple start treating
    Tile differently in advance of the product launch? Is that what
    you are saying?
        Ms. Daru. That is correct.
        Senator Lee. I understand that Apple requires companies
    like Tile and including Tile to sign an agreement to be part of
    the FindMy network.
        Ms. Daru. Correct.
        Senator Lee. What can you tell me about what that agreement
    requires?
        Ms. Daru. Unfortunately, I am not at liberty to say because
    I am under an NDA by Apple.
        Senator Lee. Okay. Mr. Andeer, will you agree to allow Ms.
    Daru to talk about the FindMy network agreement?
        Mr. Andeer. Senator, obviously that agreement covers a
    number of proprietary technologies in work that we are still
    developing here at Apple, so I cannot grant a blanket waiver to
    discuss it because there is a number of proprietary
    technologies and issues involved in that agreement.
        Senator Lee. Could you grant a waiver to the extent it does
    not include disclosing proprietary technologies? I mean our
    focus in this hearing is to discuss the state of competition
    and competition policy as it relates to app stores. Is there
    not a way to craft that waiver?
        Mr. Andeer. I am sure that there is, Senator. It is a
    little hard to do this in the moment, in the vacuum, but
    certainly general commercial terms, again, those are still
    being hashed out.
        Senator Lee. We are interested in contractual limitations,
    not intellectual property.
        Ms. Daru. Correct. Just contractual terms. No technology,
    nothing technology related at all.
        Senator Lee. Just to be clear, Mr. Andeer, your response
    related to your proprietary technology, to your IP. I did not
    hear you say anything about your contractual limitations, which
    is what we are wanting to inquire into. Is your answer still
    the same?
        Mr. Andeer. Senator, part of the challenge here for me
    frankly is we just launched this program 2 weeks ago. We are in
    the midst of talking about it with a number of different
    parties.
        Senator Lee. Sure. Sure. No. I understand you just launched
    it, but it is not like it materialized like manna from heaven.
    It did not just show up.
        Mr. Andeer. That is correct, but right now we are
    collecting feedback from a number of developers. We are engaged
    with dozens of third-parties who are really excited to use this
    technology and give me feedback on all of these terms, so I am
    in a bit of a difficult position.
        Senator Lee. Okay. I would appreciate it if you could look
    into that. Again, we are not--we have no interest in, we have
    no jurisdiction over IP aspects of it. We want to know about
    your contractual obligations there.
        Mr. Sine, in your written testimony suggests that Apple and
    Google have refused to work with you in order to improve user
    safety. Can you tell us a little bit about more about what you
    mean by that?
        Mr. Sine. Yes. First and foremost, the issue I raised in my
    testimony was about underage users. We are a platform that has
    decided because we are online dating, it is appropriate for
    only users that are 18 and older. Apple and Google collect
    information as users are registering for their iTunes accounts
    or their other accounts through which they will actually
    download those apps. In many instances, they actually know the
    age of those users. If you are a user and you move through that
    flow and you are 15 years old, you will get a pop-up that says,
    ``by clicking here you are agreeing that you are over 18,''
    even though Apple knows you are not because you have already
    entered your birthdate as 15.
        Those get passed on to our app. We then have to filter them
    out through our various age gating systems in order to make
    sure that we do not have underage users on our platforms.
        Senator Lee. Right. No. I have encountered that. One of my
    teenagers, a few years ago when I was arranging to pay her
    allowance, I tried to do it through Apple Pay. We could not do
    it at the time. She was not 18 at the time. That would suggest
    that they do, in fact, know which user. To have an iPhone, to
    operate with an iPhone, you have got to have an iTunes account.
    If it is a minor, it can be linked to an adult's account. It
    was. It knows that she was a minor.
        Mr. Sine. Correct.
        Senator Lee. We even tried to jerry rig it and go around it
    and it would not let us because it knows. That is troubling or
    that is significant at least if they do know this and knowing
    that and allowing that to be known could be useful for the
    purpose of protection. We live in a world where people do a lot
    of bad things to kids. It is hard for me to understand why they
    would not want to share that information.
        Mr. Sine. We agree, Senator. You know, in addition, our
    platforms for years have run registered sex offender checks. We
    have asked Apple and Google to share the data with us that
    would make it easier to run those checks. Again, there has
    been, while some lip service to it, very little work done. We
    have then gone around them in order to speak with people here
    in the Senate, to try and help craft legislation that would
    actually allow us to be able to run those checks with different
    data. We have also helped to support a bill that passed in
    Arizona that would allow us to get access to that data to go
    around the fact that Apple and Google do not share the
    information we need in order to run those checks.
        Senator Lee. Mr. Andeer and Mr. White, now as has been
    noted, we have got ride-sharing apps that use the internet to
    help you find transportation in the real world. Match's dating
    apps use the internet to help you find a date in the real
    world. Why does Match have to use your payment services and
    give up 30 percent or 15 percent of its revenue, but Uber does
    not? Let us start with Mr. White and then go to Mr. Andeer.
        Mr. White. Thank you, Senator Lee, for the question, and it
    is a good one, a very important question. The way we have
    designed our business model is to align our interests with our
    developer interests. We only get paid when our developers are
    engaging in the sale of digital content and only when that sale
    occurs in the app itself.
        When it comes to physical goods and services, we are not in
    a position to really protect users on what happens in the
    physical world, right. We will not know whether that Uber
    driver arrived on time or whether your groceries arrived in an
    acceptable state. When it comes to digital content, that is
    where our investments have been. That is where our value add
    is. That is why we have chosen the business model to align our
    interests with developers who are actually selling digital
    content to our shared users.
        Senator Lee. Mr. Andeer.
        Mr. Andeer. Senator, thank you. Apple's App Store was
    created 12 years ago based on a simple model. That is if you
    are selling a digital good or service, you are subject to a
    commission. Obviously we have made changes to that model over
    time in terms of making it easier for developers to sell
    outside of their app in terms of reducing the price over time.
    When it comes to this question about physical goods or
    services, like using Uber to call a car to your house to pick
    you up and take you to the airport or a Lyft to go and meet
    friends. With that, you are using the phone to communicate with
    the service provider and they are delivering that service to
    your home or your location.
        When it comes to a dating service, and obviously Tinder has
    built quite a successful business and they have a number of
    these sites. What they are doing is facilitating meeting with
    people digitally. All of that is taking place, at least it
    should be, on the device. That is you are finding a match. You
    are meeting someone. You are swiping right or left. All that is
    taking place on the device. From our perspective and from
    really the perspective of all the developers we have talked to,
    that is a digital good or service. That is not a physical good
    or service being delivered to your house.
        Senator Lee. What if your business involves the downloading
    of some other digital service? The downloading of e-books, of
    audio books, or something like that? If you are saying it is a
    digital service, wouldn't that extend to the purchase of
    downloads of books?
        Mr. Andeer. Senator, yes. Senator, yes, it does. Folks like
    Amazon and their very popular Kindle app have been----
        Senator Lee. How is that different than Match.com's apps?
        Mr. Andeer. They are both selling a digital good or
    service. One is a book. The other is a subscription to a
    service where you are meeting other people that you may be
    interested in.
        Senator Lee. Okay. Uber----
        Mr. Andeer. In both cases----
        Senator Lee. Uber, that is also a digital service in the
    sense that you are trying to find a ride. You are also paying
    for that ride. It involves movement of the person once the ride
    arrives, but in all three instances downloading of books,
    arranging to meet someone to date, or finding a ride. Aren't
    those all three digital services where you are exchanging
    information through the app?
        Mr. Andeer. Senator, respectfully, I see the car service
    very differently than the dating service or the audiobook. The
    dating service, you are meeting people on your phone. On the
    book, you are reading the book on your phone or your iPad. With
    the car service, I am calling a car to my house to come pick me
    up and take me to work or to the airport or wherever I might be
    going. The value I am getting from Uber and Lyft is a way to
    get a car to go from A to B.
        In terms of the other examples, all of the experience is
    contained within the four corners of the device. You are not
    paying Tinder----
        Senator Lee. Uber is literally meeting a stranger for
    transportation. I am not grasping the differentiation point
    between meeting a stranger for transportation and meeting a
    stranger to go to dinner. I do not get it. I am just a small
    country lawyer from Provo, Utah, but I am not----
        Chair Klobuchar. Oh, yes. Right.
        [Laughter.]
        Mr. Andeer. Senator, respectfully, when I am using Uber or
    Lyft, I am calling a car to my house to physically get in it
    and drive somewhere. When I am using--and I do not use these--a
    dating service to meet someone, I am not using it to pay that
    person to come to my house and to go on a date. That is called
    something else.
        Senator Lee. I feel like unfrozen caveman lawyer as
    portrayed by Phil Hartman in Saturday Night Live. I am just--I
    am not grasping it, but I see my time has expired and I want to
    be deferential to our Chair. Thanks.
        Chair Klobuchar. Very good. Next, Senator Blumenthal.
        Senator Blumenthal. Thank you, Madam Chairwoman. I am just
    a country lawyer from Connecticut. I tried to use that line
    once, Senator Lee, in the Supreme Court in an argument there
    and I think it is the closest I came to contempt of court.
    Anyway.
        Let me just say after listening to my colleagues, I am
    tempted to say Google and Apple are here to defend the patently
    indefensible. If you presented this fact pattern in a law
    school antitrust exam, the students would laugh the professor
    out of the classroom because it is such an obvious violation of
    our antitrust laws.
        Mr. Gutierrez, you remarked in your testimony that you were
    at Microsoft during what you call the heyday of its antitrust
    woes. I remember those days because I sued Microsoft. The
    lesson from that case that you expound here that these
    practices are exponentially worse is absolutely true, but the
    larger lesson that you tell us that the current laws are not
    working. In effect, that enforcement of them is too little too
    late. Courts are overly deferential. Agencies are reluctant to
    bring lawsuits. Therefore, we need to reform our laws is the
    takeaway here.
        Mr. Gutierrez. That is correct, Senator. I think one has to
    appreciate both from the point of view of the legal tools of
    being able to overcome this deferential approach and the task
    that the enforcement agencies would have to do that. You also
    have to recognize that in this case you would be looking at the
    business and the practices of trillion dollar companies that
    have a global footprint with a tremendous information
    asymmetry. Both from the point of view of the legal tools that
    the enforcement agencies need as well as from the point of view
    of resourcing. I think if something meaningful is going to
    happen those things have to be looked at.
        Senator Blumenthal. What I heard Apple tell you in defense
    of charging you this rent, whether it is 15 percent or 30
    percent hardly makes any difference. It is rent, arbitrarily
    imposed, to try to stifle competition and increase Apple's
    profits at your expense is, well, you can afford it. The fact
    of the matter is, that, as you said, Spotify has to pass it on
    to consumers and it inhibits innovation and competition,
    correct?
        Mr. Gutierrez. That is correct. Apple knows the business
    really well because they are in it. They are a direct
    competitor of ours. This is a textbook case of raising rivals'
    cost, which is what they are doing. They recognize, because
    they know the music streaming business, that we have high costs
    associated with paying for the content to the artists and
    musicians and they know that our margins are tight and that a
    30 percent tax, even if it eventually might come down to 15
    percent, it is just too large a fee to be able to absorb
    without passing on that increase to consumers.
        Senator Blumenthal. Just to show you that Apple is well
    aware of the value of this practice, it does not allow users to
    jailbreak their phones to sideload apps. It has shut down
    alternative app stores. In fact, as we know, Apple was sued by
    an alternative app store, Cydia, on monopolization grounds.
    Cydia's complaint makes clear that Apple not only excluded them
    from the iPhone market, but lifted Cydia's popular features and
    incorporated them into Apple's App Store. It is not only a
    matter of making you charge consumers more. It is also a method
    to suppress competition and steal good ideas, correct?
        Mr. Gutierrez. That is correct. Senator, just to follow on
    your point, if Apple is convinced that their payment system is
    that superior, that it really should command a 30 percent fee,
    they should allow for competition and let the market determine
    that. Let supply and demand determine what the right fee is,
    but they have not done that. They have not legally done that.
        Senator Blumenthal. That is right. They have not done it
    because the law has not been enforced against them. What we
    have is a classic case of exclusionary anticompetitive conduct.
    As I think all of us would agree, violations of the law and
    monopolistic abuse of power, just as it happened in the
    Microsoft case, need to be held accountable. That is why I
    support strengthening Section 2 of the Sherman Act to curb
    anticompetitive exploitive conduct by monopolists and other
    dominant companies. That is why we need to consider also
    interoperability as a remedy like it was in the Microsoft case
    and in the Access Act that I have cosponsored with Senator
    Warner.
        Mr. Sine, we have this apparent explanation of the call to
    you last night, right?
        Mr. Sine. The call was not to me. The call was to our
    person who has a business relationship with Google. It is our
    representative talking to their account representative.
        Senator Blumenthal. A representative of your company.
        Mr. Sine. Correct.
        Senator Blumenthal. Out of, what do you think, idle
    curiosity? Why was the call made?
        Mr. Sine. I cannot really speculate on it, Senator, but,
    you know, anytime you receive an inbound call----
        Senator Blumenthal. We are plausibly interpreting it
    because of the timing, because of the content of the call. We
    do not have evidence of the exact words spoken, but it looks
    like a threat. It talks like a threat. It is a threat.
        Mr. Sine. When you receive something like that, Senator,
    from a company that can turn you off overnight, you are always
    a little intimidated.
        Senator Blumenthal. Correct. It has not been reluctant to
    throw its weight around similarly. I think it is an insult to
    this Committee. I think it is more than an insult. It is
    potentially actionable and I think we should look into more
    information about it. Would you agree?
        Mr. Sine. We would be happy to comply and work with you on
    that.
        Chair Klobuchar. That is the plan, Senator Blumenthal.
    Thank you.
        Senator Blumenthal. Thank you, Madam Chair. I thought it
    probably would be. Thank you.
        Chair Klobuchar. Yes.
        Senator Blumenthal. Let me turn to another area that
    Senator Klobuchar has ably begun to explore. I did not hear an
    answer to Senator Klobuchar's question, Mr. Andeer. Has Apple
    ever used app developer's information to inform its own product
    strategy?
        Mr. Andeer. Senator, I am not aware of anyone at Apple
    using proprietary information from the App Store to develop our
    products. It is the antithesis of how we approach product
    development and innovation.
        Senator Blumenthal. Well----
        Mr. Andeer. We always create something different and
    special and unique for our customers.
        Senator Blumenthal. I notice that you carefully couched
    that answer in terms of proprietary information, but the fact
    of the matter is Apple has in effect appropriated--a euphemism
    for unauthorized taking of this information to copy and kill
    competitors. It has reportedly done this so often that it has
    earned a nickname with developers, sherlocking. Apple and
    Google have access to troves of private information about apps
    on their app stores and it enables them to identify popular and
    nascent apps and then copy and kill them by introducing those
    competing apps that mimic the original.
        Apple's former CEO, Steve Jobs, put it the company has
    ``always been shameless about stealing great ideas.'' That
    seems to be the MO of Apple and there are numerous examples of
    this copy and kill strategy. We have heard about AirTags, which
    are carbon copy of Tile's item tracking products. Let me ask
    you, Mr. Andeer, do you impose a strict firewall? Does Apple
    impose a strict firewall between the App Store and its business
    strategy?
        Mr. Andeer. Senator, if I understand the question
    correctly, we have separate teams that manage the App Store and
    that are engaged in product development strategy here at Apple.
        Senator Blumenthal. Yes. I understand you have separate
    teams. Do you have a barrier between the two? What we call in
    law firms, a Chinese wall. Do you have a strict prohibition
    against the sharing of information between the App Store and
    the people who run those businesses?
        Mr. Andeer. Senator, we have controls in place. I would
    also hasten to add that in terms of when you look at the
    marketplace over the last 12 years, we have only introduced a
    handful of applications and services during that time. In each
    and every instance, there are dozens of alternatives available
    through the App Store, oftentimes more popular and more
    successful than our own Apple service or product. We do not
    copy. We do not kill. What we do is offer up a new choice and a
    new innovation for consumers.
        Senator Blumenthal. The answer though to whether you have a
    data firewall is no. That is the way I took the answer to my
    question. Mr. White, does Google have a firewall between the
    app store and its business strategy?
        Mr. White. Senator, my understanding is we do have data
    access controls in place that govern how data from our third-
    party services are used.
        Senator Blumenthal. When you say access control, do you
    mean a firewall? In other words, no access.
        Mr. White. I am not sure exactly what you mean by firewall,
    Senator.
        Senator Blumenthal. Do you have a prohibition against
    access?
        Mr. White. We have prohibition against using our third-
    party services to compete directly with our first-party
    services, Senator.
        Senator Blumenthal. How long have you had it?
        Mr. White. We have internal policies that govern that.
        Senator Blumenthal. I am going to explore this question in
    written questions. I apologize that my time has expired. Thank
    you, Madam Chairwoman.
        Chair Klobuchar. Very good. Thank you, Senator Blumenthal.
    Senator Hawley.
        Senator Hawley. Thank you very much, Madam Chair. Thanks
    for holding this hearing. Thanks also to Senator Lee. It is no
    secret to anybody on this Committee that I think that antitrust
    enforcement not only needs to be a top priority, but we need to
    make significant changes to our antitrust laws in order to
    ensure that we are doing everything we can to get real
    antitrust enforcement in this century.
        Let me just come to you, Mr. Andeer. I notice since last
    April Apple has bought back $58 billion in stock. That is a big
    number. Quite a shift from where you were under Steve Jobs who
    used to insist that Apple would not buy back stock because it
    needed to innovate. It needed to retain those profits in order
    to reinvest, but you have clearly changed position. That is
    fine. I just want to focus on one major source of that income.
    It is not innovation. It is not research and development. It is
    the monopoly rents that you collect out of your App Store.
        I notice that you today have referred to the need to have
    that monopoly control over the App Store in terms of the
    security rationale behind it. Tim Cook has said the same thing.
    He said recently in a New York Times podcast that Apple needed
    to lock up the ecosystem, the iOS ecosystem, so it could limit
    vulnerability. The thing about that that seems strange to me is
    you do not seem to spend very much money on actually on
    security. I mean all of the money you make on your Apple tax,
    you do not invest very much of it into actual security.
        In fact, it looks to me like you did not even launch your
    bounty program where you pay researchers to discover security
    vulnerabilities on iOS until 2016. When you did that, you
    capped it. You had a hard cap on the spend. You finally raised
    the level somewhat in 2019. It does not seem to be that big of
    a priority.
        Let me just ask you this. Here is my question. Will you
    commit, will Apple commit to spending all of the money that it
    raises, all of the income it raises out of that Apple tax, all
    those monopoly rents, will it commit to spend all of those on
    security since that is allegedly why you need to have a
    monopoly in this market?
        Mr. Andeer. Senator, I appreciate the question. We have
    invested billions of dollars in securing our iPhone, our App
    Store, and all of our products. This is a priority for us each
    and every day we wake up, 24/7, 365 days a year. If you look at
    the App Store and app review process, we get 100,000
    submissions each week. We have a combination of AI and human
    review to review all of those. We reject 40 percent of them
    because they may post some sort of either performancec,
    security, privacy risk to consumers. This is something we take
    incredibly seriously.
        If you look at the objective studies that are out there,
    time and time again they find that the iPhone is the most
    secure platform and the most secure device available on the
    market.
        Senator Hawley. I did not--thank you for that. I do not
    think I heard a yes or no though in there, so let me just try
    again. Will you commit to spending--if security is the reason
    you need to have this monopoly and collect these monopoly rents
    which are sizable, will you commit to spending that money, all
    of it, on security for apps?
        Mr. Andeer. Senator, the App Store, we are going to
    continue to invest in the App Store. There is a number of
    things that we do to ensure that developers are able to create
    their apps. There is all the tools and resources and
    applications that we make available to developers. That is part
    of what is at issue with our model. We also invest obviously to
    make sure that our marketplace is trusted and safe for
    consumers. There is a number of competing investments and
    incentives for us to make sure that we continue to put the very
    best experience.
        Senator Hawley. Okay. I do not mean to cut you off. I just
    have limited time. That sounds like a no to me, which is kind
    of what I thought you would say. My concern with that is just
    it makes it hard for me to ignore the major dangers to
    competition that your monopoly in the iOS market poses.
        You recently announced that the smallest developers in the
    App Store will pay a reduced fee, 15 percent. That is very
    generous of you. You announced earlier that you take only 15
    percent from subscription revenue after the first year. You
    take 30 percent in that first year. Here is my question. Does
    Apple ever cut more generous deals to well-connected executives
    in other companies? You know, to bigtime companies. Not to the
    small companies, but do you ever cut more generous deals to the
    really big companies?
        Mr. Andeer. Senator, we do not. A fundamental principle
    since the very beginning is we treat all developers the same.
    When we launched the store 12 years ago, we took the price,
    which was 60, 70 percent, and took it all the way down to 30
    percent, in part because we wanted to encourage those new small
    and midsized businesses to enter this market. What we have seen
    over the last 12 years as we have evolved that model and we
    have reduced price time and time again is now we have a
    marketplace with 1.7 million apps, 85 percent which pay
    nothing. We think it has been an incredible benefit to
    startups, to small and mid-size businesses, and individual
    entrepreneurs.
        Senator Hawley. I find that answer strange because the
    House Judiciary Antitrust Subcommittee uncovered documents from
    2016 that showed that Eddy Cue of your company negotiated a
    deal directly with Jeff Bezos at Amazon for a special deal from
    Prime Video whereby Apple would collect just 15 percent of the
    revenue from customers signing up within the Amazon app for
    Prime Video. I am curious on what basis these special terms
    were offered to Amazon.
        Mr. Andeer. Senator, there was no special deal provided
    solely to Amazon. Those negotiations led to a new program on
    the App Store, the premium video partner program. There are
    over 200 developers that have taken advantage of this program,
    including Amazon. There are a number of developers. It is open
    to all. It is another with instance in which we have reduced
    the price to developers to encourage new innovation and
    investment. We made those same terms available to every
    developer.
        Senator Hawley. The program is the established program for
    premium subscription video entertainment providers, if I am
    correct. What happened here for those who are keeping score at
    home, is that years later when it was discovered that Amazon
    had--that Apple rather had given Amazon a special deal, Apple
    comes back and says, ``oh, no, no. We have had a program. It is
    established. It is this program for premium subscription video
    entertainment providers.'' That is a mouthful. Of course,
    premium subscription video entertainment providers means it was
    not by definition open to everybody.
        This is not the first time that Apple has done this. The
    House Antitrust Subcommittee revealed that Apple granted
    Baidu--that is a Chinese company--a fast track through the app
    review process and even assigned two employees to give Baidu
    concierge service. You have also given Netflix special deals
    that other smaller developers like app HEY did not get, for
    example. It looks like to me, here is my point. It looks like
    to me that what you have done is you have been willing to cut
    special deals with other major companies who already have
    significant market power and have significant market share and
    could use it to squeeze you, but for smaller competitors who
    are trying to get into the market, for those guys and gals,
    there you really put the squeeze on them. Isn't that accurate?
        Mr. Andeer. Respectfully, Senator, it is not. We have
    operated a store for the last 12 years that has continually
    looked for ways to encourage small and independent businesses
    to grow and develop on the App Store. There is program after
    program that we have launched. We feature these apps on our App
    Store in terms of small and innovative applications. We
    launched the small and midsize business program last year which
    reduced the commission for small businesses that was subject to
    the commission. We are going to continue to find ways to invest
    to make it possible for everyone to create on the App Store.
        Senator Hawley. My time has expired. I look forward to
    pursuing some additional questions with you and for the other
    witnesses in writing. I will just note in closing that what it
    looks like to me, the pattern here, is that Apple is happy to
    jerry rig the rules and is happy to cut special side deals and
    is happy to try and turn away--keep bigtime competitors from
    cutting into your market, make special deals with them, while
    putting the squeeze and the lid on small competitors all in
    service of keeping this gravy train of monopoly rents flowing.
    That is a big problem and it is one that I think that it is
    time we addressed and that is one of the reasons I am glad we
    have had this hearing today.
        Thank you, Madam Chair.
        Chair Klobuchar. Thank you very much, Senator Hawley. Next,
    Senator Ossoff.
        Senator Ossoff. Thank you, Madam Chair. Thank you to the
    panel.
        Mr. White and Mr. Andeer, Senator Hawley noted that you
    have consistently argued a justification for the market power
    you exercise here as your ability to regulate the safety and
    security and protection for consumers of apps that are sold on
    your platforms. One of the things that I think is most
    distressing is that it is trivially easy to find apps on both
    of your platforms which are scams, which are promoted by in
    some cases hundreds or thousands of obviously fake positive
    reviews, and which trap users in billing arrangements that are
    expensive, punitive, improperly marketed. It is very difficult
    to unsubscribe from some of these monthly billing arrangements.
        What steps are you taking to end the proliferation of scam
    apps on your platforms when you state publicly, repeatedlyc,
    that the value of your platforms is in consumer protection,
    safety and security of the consumer, and why do we rely upon
    open source reporting and journalists to find all of these apps
    that are trivially easy to identify as scams? Mr. Andeer, go
    ahead, please.
        Mr. Andeer. Sure. Thank you, Senator. We have invested tens
    of millions, hundreds of millions of dollars, in hardening and
    improving the security. Literally billions of dollars over the
    years. Unfortunately, security and fraud is a cat and mouse
    game. Any retailer will tell you that. We are constantly
    working to improve and we do that in a variety of ways.
        Internally, we are investing in more resources, more
    technologies, more tools to make sure that we can catch these
    wrongdoers. We reject thousands, tens of thousands of apps each
    year that pose a risk to our consumers, whether it is from the
    perspective of security or from fraud. We also rely on our
    external community. There are a number of stakeholders who will
    raise issues and this is important. Unfortunately, no one is
    perfect. I think what we have shown over and over again, we do
    a better job than others. I think one of the real risks of
    opening up the iPhone to sideloading or third-party app stores
    is that this problem will only multiply. If we look at other
    app stores out there, we look at other distribution platforms,
    it scares us, so.
        Senator Ossoff. Mr. Andeer. Mr. Andeer, thank you. I
    appreciate the response and I want to talk about the
    sideloading question in a moment, but let me just ask you this.
    When again there is so much reporting in tech press, there are
    independent researchers who find many of these scam apps on
    your platform. Sometimes they hook people into paying ten bucks
    a week or ten bucks a month recurring subscriptions for
    meaningless services. Apple is making a cut on those abusive
    billing practices, are you not?
        Mr. Andeer. Respectfully, Senator, I do not believe that is
    the case. If we find fraud, if we find a problem, we are able
    to rectify that very quickly and we do each and every day.
        Senator Ossoff. If you identify an app, Mr. Andeer, that is
    obviously engaged in scam billing practices, does Apple refund
    all of Apple's revenues derives from those scam billing
    practices to the consumer?
        Mr. Andeer. Senator, that is my understanding. There is
    obviously a dedicated team here at Apple who works this each
    and every day, but my understanding is that we work hard to
    make sure that the customer is in a whole position. That is our
    focus at the end of the day. If we lose the trust of our
    customers, that is going to hurt us.
        Senator Ossoff. Mr. White, another question about consumer
    safety, privacy, and security. Certain apps available through
    Google's platforms as well as Apple's platform have included
    software development kits, SDKs, which send user location data
    to third-parties, often location data brokers. There is a
    massive market for this data. Governments buy it. Corporations
    buy it. Spies buy it.
        In one prominent example, a location data company called X-
    Mode sold consumer data to defense contractors derived from its
    SDK on products sold on both the Apple and Google stores. Both
    companies announced they had banned the products, but
    researchers continued to find the X-Mode SDK, Mr. White, in
    hundreds of Android apps even after the ban. Are any X-Mode
    SDKs still present on apps sold on Google's store and what
    steps are you taking to protect your users from the sale of
    location data to data brokers?
        Mr. White. Thank you, Mr. Ossoff. It is a really good
    question. The security issue, as Mr. Andeer said, it really is
    a difficult one and one we have to invest in heavily to stay in
    front of. That is why on every Android device that has Google
    services, we require that those devices have Google Play
    Protect. It is our security monitoring service which scans 100
    billion app installs every day. Just in 2019, Google Play
    Protect removed 1.9 billion instances of malware and other
    security vulnerabilities from non-Google Play sources, just to
    give you a sense of the scale at which we are trying to attack
    this.
        Senator Ossoff. To be clear, Mr. White, and just given my
    limited time, I am referring to SDKs which perhaps should be
    classified as malware, but are not currently classified as
    malware. Do you agree that the data broker market is exploitive
    and abusive and that most of your users have no idea how much
    information is flowing to these data brokers?
        Mr. White. One of the things, Senator, that we take very
    serious is our responsibility to keep the users who come to
    Google Play for a safe and enjoyable experience, to keep them
    safe. That is why we have policies in place. If developers
    violate those policies, we review every app that is submitted
    to the Google Play store, whether it is a new submission or an
    update to an existing app before it is published. As Mr. Andeer
    said, similarly we have that. That is a combination of human
    review and automated tools. Even if we have----
        Senator Ossoff. Mr. White, will you kindly--will you please
    provide to this Committee within 30 days an one assessment of
    whether any X-Mode SDK malware or any other X-Mode SDK
    technology remains on apps sold on the Google store?
        Mr. White. Yes, Senator. I am happy to look into that and
    follow-up with your office with more details there.
        Senator Ossoff. I would like you to commit to providing
    that information, not just to looking into it, please.
        Mr. White. Sounds good, Senator. Will do.
        Senator Ossoff. Thank you so much. Finally, Mr. Cooper,
    thank you for joining us today. Mobile apps collect, use, and
    store a massive array of sensitive personal data. Do you
    believe we need legislation that would ensure that the privacy
    policies provided by app developers and app stores disclose in
    plain English that is decipherable to everyone all data
    collection practices, data storage practices, and third parties
    to whom such data might be sold?
        Dr. Cooper. Yes. That was, in fact, the thrust of the
    second half of my recommendations because the demand side, it
    turns out, is as important as the supply side. If you liberate
    these folks, they will not get any place if the consumer does
    not have sovereignty. The idea of open, fair, actionable
    information provided to consumers, true consumer choice, is
    absolutely critical.
        The interesting thing here is that this is one area in
    particular--there may be others--where it may not be the
    antitrust authorities who you want to do that because it is not
    the kind of thing they do. They do not engage in behavioral
    regulation. They actually avoid it as best they can. This is
    one area where you really need stand-alone legislation and we
    need to have a good conversation about who the regulators
    should be. We may not have any in our society. We may have to
    create a new office. We can look around, but there is no doubt
    that if you do not fix the demand side and the flow of
    information and give consumers back their sovereignty, which
    they have lost to these platforms, you will not get very far
    toward promoting competition.
        Senator Ossoff. Thank you, Dr. Cooper, and thank you, Madam
    Chair.
        Chair Klobuchar. Okay. Thank you very much, Senator Ossoff.
    Good job.
        Before I turn to Senator Blackburn, just some submissions
    for the record from John Bergmayer, Charlotte Slaiman, and Alex
    Petros at Public Knowledge; from Morgan Reed at The App
    Association; from Bruce Gustafson and Sarah Richard at
    Developer's Alliance; from Meghan DiMuzio at the Coalition for
    App Fairness from Tech Freedom; from Arthur Sidney of the
    Computer & Communications--we must have a good hearing, Senator
    Lee. From Arthur Sidney at the Computer and Communications
    Industry Association; and from Professor Michael Jacobides at
    the London School of Business. I seek unanimous consent to
    enter these submissions into the record. Without objection.
        [The information appears as a submission for the record.]
        Chair Klobuchar. Senator Blackburn.
        Senator Blackburn. Thank you, Madam Chairman. Yes, indeed,
    it is a good hearing. I think that the witnesses see this is an
    area where there is a good bit of agreement.
        Picking up where Senator Ossoff left off, you know, there
    is frustration with some of the Big Tech providers when it
    comes to the issue of privacy and security. Dr. Cooper, I
    appreciate your remarks. One of the questions we ask is who
    owns the virtual you. Who owns the virtual you? Which is you
    and your presence online.
        To Mr. White from Google, we are fully aware that you
    collect this information and then you monetize this
    information. The question is why should we trust that Google
    will not use this information to further entrench this data
    monopoly that they have going? Mr. White, why should we trust
    Google to not monetize this information and to benefit from it
    and will Google commit? Since you did not want to answer
    Senator Ossoff's question, I will pose it to you a different
    way. Will Google commit?
        Will you commit in writing that you are not going to use
    any of this consumer data information to inform your other
    business lines and to not collect or store any information
    other than that that is necessary to facilitate the transaction
    that is taking place on your system? Mr. White, will you commit
    to that, that you are not going to capture and hold and utilize
    and monetize this information? That you are going to let
    consumers own their presence online. Are you ready to make that
    commitment to us?
        Mr. White. Thank you, Senator Blackburn, for the question.
    To your point around why should consumers trust us, that is the
    core thrust of our business model. We are an information
    company.
        Senator Blackburn. Mr. White, that is really not the
    question. I am asking for your commitment. You ready to give
    it?
        Mr. White. Senator, what we do is we try to provide users
    with transparency, security, and control. We give them access
    to the data that is being collected and we give them the
    controls and they can decide.
        Senator Blackburn. Sir, you are skirting the question, so I
    will reclaim my time. Let me go over to Apple. Apple seems to
    have two operating standards. There is one for doing business
    in America. There is a second standard for appeasing the
    Communist Chinese. Apple kicked Fortnite--and I am aware of
    Fortnite. I have two grandsons that are 11 and 12 and I have
    watched them play Fortnite. Apple decided to kick Fortnite out
    of the App Store over a fees dispute, but it lets TikTok stay
    on despite violating privacy rules. Apple will pull Hong Kong
    pro-democracy apps from its store when the Communist party
    demands that it pull it, but then it will not cooperate with
    the FBI to catch terrorists in America.
        Madam Chairman, there is an excellent article on Apple's
    willingness to bend the knee to China in the New York Post. It
    is called ``Is your iPhone Worth China's Tyranny.'' I would ask
    your permission to insert that into the record.
        Chair Klobuchar. Without objection. It is in the record.
        [The information appears as a submission for the record.]
        Senator Blackburn. Thank you. There is the Tim Cook-run
    Apple which turns a blind eye to Communist China's human rights
    abuses in Tibet and Zhejiang. Then there is the Apple of Hong
    Kong run by Jimmy Lai, who is willing to go to jail for a
    publication that fights for democracy. It is sad to see the
    Apple of the west speak up against injustice in America, yet
    stay silent when it comes to China's atrocities and the
    genocide they are carrying out against the Uyghur.
        This month Apple is finally rolling out new privacy
    policies that claim to empower users and stop unwanted location
    tracking. I am concerned that Apple's Privacy By Design, as it
    is called, cannot coexist with turning a blind eye toward
    Beijing's behaviors. Last year, Forbes reported that Apple
    caught TikTok spying on users using the clipboard feature. Even
    now, TikTok is plotting ways to get around Apple's new privacy
    policies. Yet TikTok remains available to download in the App
    Store, putting iPhone users' privacy at risk. If Apple is
    imposing 30 percent for safety and security, does that mean
    Apple is also responsible for all costs related to breaches of
    safety and security on iPhones? Waiting for an answer.
        Mr. Andeer. Thank you, Senator. We take privacy incredibly
    seriously here at Apple. We have embedded technologies and
    features over the last 25 years to ensure that all of our
    products respect your security and respect your privacy. That
    guides our own products. That also is increasingly guiding our
    third-party developers and partners to make sure that your
    information, you understand who has access to it and you have
    control over it. That is true here in the United States, in
    China, and around the world.
        Senator Blackburn. Okay. Alright. Still you are charging 30
    percent for safety and security. When breaches occur, which is
    my question, are you responsible for all costs related to
    breaches of safety and security? I was not asking if you took
    it seriously. I was asking for your actions.
        Mr. Andeer. My apologies.
        Senator Blackburn. Do you assume all of those costs? Then
    let me continue if--let me ask you this. Are you telling
    Congress and the world at large that you are charging this
    massive sum because this work is very difficult and that you do
    it well, that you have extraordinary security measures? If that
    is the case, why should you get all the money, but not take any
    of the responsibility for the breaches of safety and security
    on iPhones and iPads?
        Mr. Andeer. Senator, we have thrown open the gates of the
    iPhone to third-party development. From the very beginning, we
    have had a model to support that in terms of charging a
    commission for digital goods and services that supports all the
    technology, resources, and all the things that we pour into our
    developer program and to build the App Store. Part of that is
    security and privacy, absolutely. It is something that we will
    continue to invest in and continue to work on. We now have a
    marketplace in which we have 1.7 million apps. Eighty-four
    percent of them pay nothing. We are working tirelessly to
    create the best possible experience for both our customers and
    developers and part of that is privacy and security.
        Senator Blackburn. Okay. I am running out of time, but
    thank you for the answer. Mr. Sine, I have a question to you
    that will relate to that. I will submit it to you for a written
    answer.
        Chair Klobuchar. You can ask him now. A few people have
    gone over.
        Senator Blackburn. Okay. Thank you. Let me ask you with
    Match, you all have an app. How do Apple and Google use safety
    as a pretext for controlling what apps can or cannot do in the
    App Store and how do you see them selectively applying
    standards to disfavored apps? Because I cannot get a straight
    answer from either of them. I have been listening to the
    hearing in my office and I have heard a lot of hot air and
    generalities and not a lot of specifics.
        Mr. Sine. Yes, Senator. The reality for us is we do not see
    a lot in terms of safety that they are talking about that they
    provide to us. Again, as we mentioned, they do not even do the
    basic which you would think is limiting underage users from
    downloading our apps when they know that those users are
    underage. We have actually seen them, as I mentioned, in Taiwan
    block our app because we wanted to do ID verification. They
    have blocked other versions of our app because we wanted to do
    multifactor authentication, telling us that it was
    inappropriate for us to mandate two forms of identification in
    order to make sure that someone could access our app because we
    wanted to make sure it was the right person.
        When Apple talks about the need for safety, security, et
    cetera, the reality is if it was really about safety, security,
    et cetera, in-app payment would be applied to every app on the
    platform, not just 15 percent, because we all have users.
        Senator Blackburn. Thank you for the clarification. Mr.
    Gutierrez, I will come to you for a question written. I spoke
    to the House of Lords in the UK yesterday on a couple of
    things, so I will just send those to you in writing.
        Madam Chairman, you were generous with the time. I think
    this shows exactly why we need to move forward with privacy,
    data security, antitrust, and Section 230 reforms in order to
    provide protection for consumers in the virtual space.
        Chair Klobuchar. Excellent. Thank you very much, Senator
    Blackburn. Senator Lee.
        Senator Lee. Thank you, Madam Chair. When Senator Blackburn
    referred to the House of Lords a minute ago, I flinched a
    little bit because usually that is used as a denigrating
    reference to the Senate, but glad to know you were talking
    about the actual House of Lords.
        Mr. Gutierrez, let us start with you in this round. A
    recent filing in the Epic v. Apple case contains some quoted
    discussions with Phillip Shoemaker, Apple's director of App
    Store review from 2009 until 2016. Shoemaker said that Apple
    had used the App Store ``as a weapon against competitors'' and
    has rejected or delayed competing apps on pretextual grounds.
    He further explained that although in theory an iOS developer
    that is unhappy with Apple could simply leave the iOS platform
    and perhaps write only for Android and compete only in that
    space. Although they say that, perhaps most app developers do
    not consider taking that step and therefore do not consider
    abandoning iOS to be a viable, realistic option.
        My question to you is if developers cannot leave, if they
    feel that is not a viable option, even if they are being abused
    or mistreated, how would an operating system ever feel the need
    to change? Why would they change if they have got a captive
    group of people who have no place else to go or who cannot go?
        Mr. Gutierrez. Senator, the reality is they will not do it
    out of their own initiative. They have to be forced to change.
    That is why we were the first company to actually publicly have
    the courage to come out and speak about these things. Then what
    has happened since then is this debate has really blossomed.
    This debate has really happened across both sides of the
    Atlantic. You see companies come in front of you. A coalition
    that we helped found now has 55 members and continues to grow.
    It is only through companies speaking out about the real
    implications of their actions and legislators and government
    agencies and enforcement agencies looking into these issues
    that they are ever going to change. Otherwise they will
    continue to apply to this superficial pretext and continue to
    behave exactly in the same way that they have in the past.
        Senator Lee. Okay. Something you just said made me remember
    a question asked by Senator Klobuchar to another witness
    earlier in the hearing when you talked about having the courage
    to talk about it. As a result of testifying today, do you feel
    fearful of retribution?
        Mr. Gutierrez. Because we have a long history of engaging
    with Apple, I think they know better than to call us on the eve
    of our appearance here, but I--over the years, I can tell you
    right off the top of my head of at least four clear examples of
    threats and retaliation that we have faced with them from the
    very existential threat of being removed from the App Store
    because we had decided not to implement the payment system
    going forward to the clear statement to us that our app even
    though at the time was a top grossing app on the app, it would
    never be promoted on the App Store or receive any marketing
    because we were a competitor to changes, unilateral changes to
    the rules that retroactively outlawed things that we did to our
    products to having to wait sometimes months for our app updates
    to be approved even though they contained bug fixes and
    vulnerability fixes as well as a number of other things. They
    have basically thrown the book at us in a number of ways to
    make it hard for us to continue to sustain our decision to
    speak up.
        Senator Lee. Thank you.
        Dr. Cooper. Senator Lee.
        Senator Lee. Yes.
        Dr. Cooper. Let me make a point. You have raised the most
    important issue.
        Senator Lee. I do not have a lot of time, so if you can
    quickly.
        Dr. Cooper. One of the most important reasons, ways to get
    people to come forward is to have a Department of Justice they
    believe in that will listen to their complaints and carry them
    forward. That is exactly what your job is, is to create that
    kind of Department of Justice, because otherwise they are
    naked. When they have a Department of Justice, they can tell
    you what the problem is. They can say it in public. That is why
    it is so necessary to pass legislation.
        Senator Lee. Mr. Andeer, Apple frequently cites the need to
    protect users' privacy and security. These are laudable goals.
    In fact, I am an Apple customer for that reason and many
    others. I appreciate Apple's sincere commitment not to sell my
    data and to protect my privacy, but how can competitors and
    customers and legislators and others be sure that security and
    privacy are not being used as a pretext to exclude competition
    as alleged by Mr. Shoemaker and the question that I asked a
    moment ago to Mr. Gutierrez?
        For example, other documents in the Epic litigation that I
    referenced revealed that Apple's human review process typically
    took 13 minutes per app, 13 minutes for each app. That the lead
    engineer responsible for detecting fraud and abuse in the App
    Store analogized the review process to bringing a plastic
    butter knife to a gun fight. Meanwhile, it seems like apps that
    present potential competitive sort of threat to Apple are often
    delayed or blocked or disadvantaged. In other cases, apps that
    do not present those, but perhaps offer a differing viewpoint--
    I am referring here to Parler, suffer a different sort of fate.
    Anyway, back to the competing space, how can we ensure that
    your privacy and security protections are in fact narrowly
    tailored to help consumers while minimizing the impact on
    competition and that those concerns are not being used to
    shoehorn in anticompetitive behavior?
        Mr. Andeer. Senator, I appreciate the question. I think
    what we have is a 12 year track record that we can look back
    upon. What we have done consistently year after year, day after
    day, is think about how we can harden and secure our devices to
    make them the most secure in the marketplace, as study after
    study has found, and introduce new features to give you the
    power and the information you need to decide whether you are
    going to share your information or not with a particular
    developer.
        In terms of what that track record also shows is over that
    12 years, the App Store and everything that we have made
    available to developers has unlocked a tremendous amount of
    competition. If you look at our aps, and there is just a
    handful of them, they are a drop in the bucket of this ocean of
    1.7 million apps. In each and every category you are going to
    see an alternative like Spotify or someone else who is doing
    better than our service. There is no advantage seen in the
    market. From my perspective, and I have been practicing in this
    area for 20 years, I always look to the market for answers. I
    look to see like what is happening. When we look to see what is
    happening, we see that competitors are not just doing well on
    iPhone. They are thriving.
        Senator Lee. Now, wait. Is that what you are doing when you
    get publishers to fix prices of e-books? Is that the track
    record you are referring to, sir?
        Mr. Andeer. Senator, no, I am not. That is a different
    business in terms of selling e-books.
        Senator Lee. It is a different business, yes, but it was
    anti-competitive. You are asking us to take your word for it
    here. We have got witnesses here telling us that they are
    scared, that they are intimidated. What is your response to
    that?
        Mr. Andeer. Senator, I would again look at our 12-year
    track record. If you look at Spotify, they have been downloaded
    from the App Store nearly half a billion times. We have
    processed dozens, hundreds of updates for them over the years.
    They built the market leading position in digital music
    streaming. If you look at Tinder and all the other brands it
    has acquired over the years, they have been downloaded hundreds
    of millions of times and we have processed thousands of
    updates. If you judge us by our track record, you will see that
    we have not just not engaged in this bad activity. We have been
    supporting these businesses. We are going to continue to going
    forward. There is no evidence of retaliation.
        Senator Lee. When you get publishers to fix the prices of
    e-books, was that not part of your App Store business?
        Mr. Andeer. Senator, no, it was not. It was part of our
    iBooks business, our ibook store. Again, in that case, we were
    judged by the evidence. We may disagree with the outcomes, but
    we were judged by the evidence. That is all I am saying is you
    can look at the evidence of the App Store over the last 12
    years and see that it has created some incredible economic
    opportunity.
        Senator Lee. It is still a store. It is still a store on
    iOS devices.
        Mr. Andeer. Yes, it is, Senator, and it has been a store
    for nearly 12 years with the same basic business model. All we
    have done time and time again is reduce prices and reduce
    flexibility for developers to create their amazing applications
    for their customers.
        Senator Lee. Madam Chair, I see I am dangerously over time.
    I apologize.
        Chair Klobuchar. No. That is okay. Do you have anymore? It
    is fine. Okay. Very good. All right. I have a few more
    questions here and then we will finish up.
        Mr. Andeer, you have argued in the past and actually in
    testimony before the Arizona House of Representatives and in
    your written testimony that the 30 percent commission is not
    just a payment processing fee, but it also reflects, as many of
    the other Senators discussed with you, the secure app
    environment created by Apple and the fact that the App Store is
    like a studio for developers providing developer applications
    and APIs to help them build apps.
        First of all, I guess my question is similar to what you
    have heard before. If that was the case, it seems like all
    developers benefit from the secure Apple environment and that
    all developers who enroll in the Apple Developer Program for
    $99 get access to App Store developer tools. What benefits in
    addition to payment processing do the developers who must pay
    the in-app purchase commission get? It sounds like all they get
    is payment processing as an inflated price. I am just trying to
    figure out the difference. You have had a discussion, of
    course, with Senator Lee about the difference between dating
    and getting a ride, which was fascinating, one I will never
    forget. You have had a discussion with Senator Hawley about why
    don't you just have the security fee charged or there is just
    no way this can cost 30 percent of what they bring in, the
    security piece of it. My question is again, what benefits in
    addition to payment processing do the developers who must pay
    the in-app purchase commission get?
        Mr. Andeer. Sure, Senator, and I appreciate the question.
    The model that we introduced along with opening up the iPhone
    up to third-party development 12 years ago was simple. We say,
    hey, if you are going to sell a digital good or service you are
    going to be subject to the commission. That supports all the
    investments and all the things we have done in terms of
    continuing to open up the iPhone and additional features and
    technologies. We have gone from 10,000 APIs to 250,000. We have
    launched frameworks and resources and software to make it
    incredibly easy for a developer to build a app. We have built a
    store that is now in 175 different countries with unique
    storefronts. We have an editorial team that features different
    applications and different developers.
        There is an incredible amount of investment that we make
    into the App Store and the technology platform that supports
    the store. We recuperate that and we drive that from the
    commission structure. We think that has been a fair deal and
    that has proven out over the past 12 years in the form of we
    have got 1.7 million apps. We have got incredible rich array of
    content available to our consumers. We see this as a business
    that has been great for developers.
        Chair Klobuchar. Would not it be better for consumers if
    these guys were able to tell them that they could get cheaper
    rates somewhere else?
        Mr. Andeer. Senator, I absolutely agree and they all do.
    Spotify----
        Chair Klobuchar. Wait. Wait. Spotify can say, ``Hey, you
    can get a cheaper rate on our website?'' Can they say that on
    your app?
        Mr. Andeer. To be clear, Senator, Spotify can do that
    through one of its more than 8,000 partnerships. What it does
    in our app and what we say in our app, much like what Verizon
    would say to Apple if we said, hey, we want to come into the
    Verizon store and put a sign up that says, ``go buy our iPhone
    down the street at the Apple store.'' They are not going to
    allow us to do that. No retail is going to allow us to do that.
        Chair Klobuchar. I think there is a difference with----
        Mr. Andeer. The App Store----
        Chair Klobuchar. Okay. I think there is a difference.
    Maybe, Mr. Gutierrez, you want to respond with that analogy,
    with where they are when they are depending on you for this App
    Store.
        Mr. Gutierrez. I do. This is highlighting a really
    important point. Apple takes the position that our users are
    their users, that they own the customer relationship. They are
    injecting themselves in the middle of the relationship and they
    believe that they can control our communications with them, our
    offers to them, the promotions and benefits that we would give
    them. That is the heart of the problem here, which is this is a
    model where basically a handful of global gatekeeper platforms
    cannot claim that they own the user relationship of all the
    users of all the apps that are offered on the mobile platforms.
    That is the path that this approach is leading to, which is why
    it is so important that these issues are addressed.
        Chair Klobuchar. Yes. Dr. Cooper, I know you have not
    gotten too many questions, but you did not get a call last
    night not to testify, so I mean that is not what they said too.
        Dr. Cooper. They might not have----
        Chair Klobuchar. They did not say that to Match.com, but
    they questioned their earnings statement, even better. You did
    not get a question like that, right? Okay. I guess I want to
    know from your perspective as someone who advocates on
    consumers' behalf. This issue that we were just talking about
    with Apple and with Spotify which is really an issue for
    everyone. Like it is that cannot advertise that you can get
    cheaper rates for their consumers. How does that affect
    consumers and how does the fee? Two separate things. The ban on
    telling them that they can get a cheaper rate somewhere and
    then the fee.
        Dr. Cooper. If these folks could compete on a level playing
    field, it would have a benefit that has been missed here. That
    would put tremendous competitive pressure on the platforms.
    They would look out in the world and say, holy mackerel, we
    could lose all these customers to someone else who is treating
    them fairly. That would put tremendous pressure on the
    platform.
        The second thing that could happen is that these folks
    could get together and say, you know what? We have got enough
    users to build our own platform and new entry. That was the
    logic of the Microsoft case, which in fact, if you go down the
    list of abuses you started with, is identical to the Microsoft
    case. How it is for 20 years we have not won the court cases
    and we have them now, is amazing. It is amazing how much they
    have done the same dirty old business practices. Those hurt
    consumers. We learned that a long time ago. Our best protection
    is real competition and this is a space in which we do not have
    it.
        Chair Klobuchar. Exactly. I bet you have been waiting to
    say that, Dr. Cooper, behind your mask all this time sitting
    there.
        Dr. Cooper. I kept trying to find a way to get in.
        Chair Klobuchar. Okay. The House Antitrust Subcommittee
    Digital Markets Report cited estimates that Apple makes between
    $15 and $18 billion a year on the App Store, Mr. Andeer.
    According to Phillip Shoemaker, Apple's former director of app
    review for the App Store, it costs less than $100 million a
    year to run the App Store. That sounds like an incredibly
    profitable business and frankly, as was noted by several of my
    colleagues, those look like monopoly profits. How does Apple
    justify the 30 percent commission fee rate when the cost of
    running the App Store is so much lower than the revenues the
    company generates from the App Store?
        Mr. Andeer. Senator, I appreciate the question. As I have
    mentioned, Apple has invested significant sums in technologies,
    resources, tools to allow developers to build their apps far in
    excess of this $100 million figure that was----
        Chair Klobuchar. Okay. Then what is the correct number?
        Mr. Andeer. Senator, I do not have the exact figure. I know
    it is more than $100 billion that we have invested in iOS and
    iPhone.
        Chair Klobuchar. Do you know how much revenue it generated
    last year? I mean it is relevant because we are talking here
    about a monopoly situation.
        Mr. Andeer. Senator, understood. When we look at the App
    Store, it is not a separate standalone business for us. It is
    an integrated feature of our devices. We do not have a separate
    profit and loss statement for the App Store. What we do know is
    that the economic opportunity has been studied and assessed and
    we know that developers are creating apps, whether it is mobile
    advertising or selling physical goods or digital goods and
    content, that has generated more than $500 billion. I think you
    mentioned this in your opening statement. There is an
    incredibly economic opportunity that has been created for
    developers. On a very small percentage of those sales do we
    levy a commission.
        Chair Klobuchar. Okay. You have no numbers, which I am sure
    exist. We will try asking you in writing. I have no choice but
    to go with the House numbers because there is no other number
    on that table and that it is $100 million a year to run the App
    Store and that you make $15 to $18 billion.
        Mr. White, how much does it cost Google to run the Play
    store and how much revenue did it generate in the last full
    year?
        Mr. White. Senator, I do not have those exact numbers, but
    happy to follow-up with your team on that. What I can say
    though is with the Android ecosystem, the amount of competition
    and choice that that has brought to the mobile landscape, how
    it has brought down the cost of mobile devices. As I said in my
    opening statement, you can get an Android phone now for less
    than $100 bucks. In your opening comments you talked about
    accessibility and why it is important for people to have access
    to mobile devices. We think that is what Android has actually
    brought to this landscape. Almost 2 million American jobs that
    have been created by this ecosystem.
        Chair Klobuchar. Okay. I believe and I said very clearly at
    the beginning that I do not challenge the success. I am proud
    that we have developed these innovations in America, but you
    have to keep rejuvenating capitalism. You have to keep allowing
    new people to come up with new ideas. I am not going to go
    beyond this issue, but I think--well, maybe I will for 30
    seconds. I think when you look at some of these purchases of
    Facebook and Instagram and WhatsApp and what has happened and
    then you look at all the problems we have had in terms of
    privacy and other things, that you are literally stifling--this
    is not about you, of course, but, in general, the tech
    companies are stifling some of the new developments we could
    see for privacy and other things by how this has all gone down.
    Then you have on top of that the issues for consumers.
        I guess do you think, Dr. Cooper, listening to those
    numbers I just read out which are the only ones available to
    us, do you think that these companies are operating in a
    competitive market, Apple and Google?
        Dr. Cooper. Actually, there are other numbers which are in
    one of the reports we will file with the Committee.
        Chair Klobuchar. Okay.
        Dr. Cooper. I looked at the learner index for these two
    companies and it is way above the national average. They are
    overcharging consumers for their products and earning excess
    profits. These two companies in particular. There are other
    digital companies that were much lower and it turned out that
    they exist in marketplaces where they face much more
    competition. The absence of competition in that document, and I
    will call your staff's attention to it, is demonstrated to me
    that we are being overcharged and our prices could be lower and
    these folks are these ones who----
        Chair Klobuchar. None of the companies here before us are
    saying that this--in person here--are saying that this should
    be free, right? You are just questioning the amount of the
    charges, right?
        Dr. Cooper. There should be a normal rate of profit on that
    line of business. As you have heard and you suggested, there is
    not. The only way they can keep that is if they exercise their
    market power and lock consumers out.
        Chair Klobuchar. Okay. Another related issue. Mr.
    Gutierrez, some developers have raised concerns about App Store
    operators preferencing their own apps in App Store's searches
    so that their apps show up at the top of the search results. I
    remember a long time ago this issue raised in a different
    context by Senator Lee. Do you share this concern?
        Mr. Gutierrez. Yes. This is just another manifestation of
    the complete control that they have and the fact that the
    decision on who gets promoted, who gets discoverable is really
    completely manipulated to help Apple's own services. This makes
    it really clear. We have heard Apple say a number of times
    about all the value that they brought to these apps including
    some of the services that are represented here. The reality,
    Senator, is that Spotify, and I can say the same thing probably
    for Match and for Tile, we are not successful because of what
    Apple has done. We have been successful despite Apple's
    interference. We would have been much more successful but for
    their anticompetitive behavior.
        Chair Klobuchar. Okay. Mr. White, what are the factors
    Google uses to display app results when a consumer searches for
    something in the Play store? Does it preference Google's own
    apps in the Play store? Has it ever done so?
        Mr. White. Absolutely not, Senator. We are an information
    company. Our core business model depends on users trusting us
    to provide accurate, unbiased information. We do not preference
    our first-party services over our third-party services in the
    Google Play store. We want when users come to the Play store
    searching for their favorite apps or games for them to find the
    most relevant information.
        Chair Klobuchar. Okay. Mr. Andeer, I have seen news reports
    that Apple has a 42 factor algorithm for how it displays app
    results when a consumer searches for something. Is that correct
    and which factors weigh most heavily in your algorithm? Does
    Apple preference Apple owned apps in the App Store searches?
    Has it ever done so?
        Mr. Andeer. Senator, I am not intimately familiar with our
    search algorithm in the App Store, but I do know that we do not
    favor our own applications or services in the search
    functionality. Again, I think if you look at the experience
    over the last 12 years, we have over half a billion users who
    have found and downloaded Spotify during that time. Same is
    true for a whole host of companies that compete with us. The
    objective evidence is, hey, consumers are finding what they
    were looking for, so no, we do not favor ourselves in search.
        Chair Klobuchar. Ms. Daru, do those answers give you
    comfort?
        Ms. Daru. No. They do not.
        Chair Klobuchar. Why not?
        Ms. Daru. Because we are hearing over and over things that
    are not consistent with our experience. For instance, earlier
    today, Mr. Andeer said that we could not talk about the MFI
    agreement because they were in negotiations with other
    developers regarding that agreement. We were told that
    basically we could not negotiate that agreement and that that
    agreement we had to sign as is, and in fact, that they are not
    going to give us any more information about this program unless
    we actually sign it. It is things like that that make me
    question some of the statements.
        Chair Klobuchar. Mr. Andeer, and I will ask this of both of
    you, I guess, Mr. White. A number of app related to this, a
    number of app developers have complained about a lack of
    transparency regarding the application of Apple's and Google's
    respective app store rules and policies. They have expressed
    frustration about often not knowing why an app or an app update
    has been rejected. For each app or update that is rejected or
    removed from the App Store by Apple, Mr. Andeer, will Apple
    commit to providing the developer of the app with a written
    explanation of why the app or update was removed or rejected in
    a timely manner including citations to the applicable Apple
    rules or policies under which the decision was made? Will you
    do that?
        Mr. Andeer. Senator, we do that today. We have guidelines
    and we have for 12 years. We are in constant engagement and
    discussion with developers. As I mentioned, we get 100,000
    submissions each week. We have to reject 40 percent of those,
    whether it is for performance, safety, security, or some other
    reason. In each and every instance, we try to communicate what
    the issues are and we talk to thousands of developers each and
    every week.
        Chair Klobuchar. Uh-huh. Google, answers on that?
        Mr. White. Yes. Thank you, Senator. Very good question.
    Very similarly, that is generally our practice today. I will
    say one caveat to that is if there is a serious security
    violation we may remove that app more quickly just to make sure
    we are protecting our users and their devices. As I said, the
    Google Play Protect Monitoring Program scans 100 billion apps
    every day, right. If there is a major security violation we
    will take that app off of the play store very quickly and then
    communicate with the developer on what the violation may have
    been.
        Chair Klobuchar. Okay.
        Mr. White. Senator, whenever we do take enforcement actions
    like that, we do give our developer partners avenues for
    redress. They can appeal those decisions and they can have
    those decisions reviewed again. We make sure that our
    developers are in constant communication on how they can be in
    compliance with those publicly stated policies.
        Chair Klobuchar. Anyone anything on this? Want to respond,
    Mr. Gutierrez?
        Mr. Gutierrez. Senator, our experience may illustrate a
    little bit of how this application of these rules actually
    happen in practice. It happened to us multiple times. When we
    decided to take IAP down, after Apple launched the competing
    service at a price below ours, we complied with the rules as
    they existed at the time which basically said we could not have
    a buy button or a link to a payment mechanism. We decided,
    Okay. We will take that. It will not be part of that.
        Apple then came back and they said it is not just that we
    could not have a buy button in our app if we did not have IAP.
    We could not even email our users to tell them about a way to
    upgrade. We could not mention in the app that they could get a
    premium app. We could not tell them that that were discounts or
    promotional plans that they could sign on. Then what happened
    is the month after we did that after they had engaged in this
    extensive, expansive interpretation that was not supported by
    the rules, they changed the rules to retroactively support the
    interpretation that they had started applying in our case. That
    is what total control of their ecosystem means in the case of
    Apple.
        Chair Klobuchar. Okay. Mr. Sine, and then I have one more
    question to you, Mr. Sine, and then I am almost done.
        Mr. Sine. Sure. Our experience has been similar to Mr.
    Gutierrez. We have had situations--and it is not really that
    they do not tell you which rule you have violated. They do not
    tell you how you violated that rule or how to fix it. That is
    the problem. We had an app, one of our Tinder bills, that
    actually had a very important safety feature for our LGBT+
    community where it would actually inform users when they were
    in a country where they might be at risk for exposing their
    gender identity or otherwise. That sat in the App Store review
    process for two months because Apple had said that we were
    violating a new policy or they said the spirit of the policy
    and could not tell us expressly how we needed to solve it in
    order to get that launched. We had to go all the way up to
    talking to the chief executives through our chief executive at
    IAC at the time in order to actually get that app unblocked two
    months later.
        Chair Klobuchar. Wow. Okay. Just to kind of pull this out
    from the trees to the forest here, so and I think, Mr. Sine, I
    will do this here with you. I think one of the things that
    people think--they hear all of this and they think, well, why
    don't you just sell it on your website then? Why do you need
    these guys? If they are doing this to you, why can't you just
    go and compete on the web on your own? Could you answer that?
        Mr. Sine. Yes. Like I said at the beginning of my
    testimony, they have essentially taken the internet and moved
    it into the app stores. They have set up their gateways. They
    have set up their toll booths. You have got to pay the toll if
    you are a digital good and service. They give everybody else
    access onto the freeway. What we are saying is why isn't the
    freeway the same for everyone and why isn't everybody paying
    the same thing as they are traveling down the freeway? We have
    never gotten a good answer to that, Senator.
        Chair Klobuchar. Uh-huh. To me when I hear all this I
    think, okay, our laws are exactly the same that they were
    basically. Our competitive policy laws, our antitrust laws,
    even our privacy laws on the Federal basis are the same from
    back when whenever it was and whoever did it--we are not going
    to get into that--the internet started. That, in fact, we have
    seen this major change, major ecosystem change. We are just not
    as sophisticated as these biggest companies the world has ever
    seen who we are very proud of in many ways, but that are
    basically using that system. That leads a number of us up here
    to say we need to get changes. The first thing is we need to
    have the agencies be as sophisticated as they can, which is why
    Senator Grassley and I have the proposal of something we can do
    immediately. The appropriations process is more the end of the
    year.
        To be able to change the fees for mega merges. This is
    across the board, not just tech. That we can get more money to
    the FTC and to the DOJ Antitrust. By the way, that was
    supported by the Trump administration, just like these lawsuits
    were actually brought by the Trump administration, which I have
    commended Meghan Doverheim over at DOJ Antitrust and former
    Chair of the FTC Simon for doing and are now being continued by
    the Democratic administration, which is how some of these SEC
    suits, as you know, Dr. Cooper, have gone in the past. They
    have bridged administrations. We think that we need to get
    funding to really play them out like they should.
        The second thing we could look at, in addition to my bill,
    which I am not going to go. It is 5:20 p.m. On the Competition
    and Antitrust Law Enforcement Reform Act, which ups the
    standards on exclusionary conduct and would really help us
    adapt to the world we are in. I cannot even call it a new
    world. We have been in it for quite a while and we have not
    done anything about it.
        The other thing we could do, I know State lawmakers in
    Arizona, Massachusetts, North Dakota, which is not exactly a
    radical State. I was just over there with Senator Hoeven and
    the Republican Governor on a water project, but they are
    looking at this. My home State of Minnesota. They are looking
    at legislation on a State by State basis to regulate app
    stores. Some of you have been involved in these conversations.
    In your opinion, should we consider legislation on the Federal
    basis to regulate app stores and why?
        Mr. Sine. I 100 percent agree that that would be the right
    course of action. The reality is, as I said in my opening
    statement, this mandatory in-app payment structure, the way
    they have this set up, that is the lifeblood of their monopoly.
    It is their lifeblood to get the data from their users. It is
    their lifeblood to fund all these excess profits they are
    getting. It is their lifeblood to be able to identify what
    competing apps are and who their users are, how much they pay,
    when they pay, everything. If you cut that off, and the reason
    they are fighting so hard to defend it, the reason they went in
    and hired every lobbyist in the State of Arizona to defeat it--
    --
        Chair Klobuchar. Probably not everyone.
        Mr. Sine. Everyone but the one we hired.
        Chair Klobuchar. Okay.
        Mr. Sine. The reality is they are fighting so hard because
    it is core to the maintenance of their monopoly.
        Chair Klobuchar. Okay. Anyone else want to take that?
        Mr. Gutierrez. Senator, I would just add that in addition
    to the appropriations process that you mentioned and in
    addition to the bill, we actually--the broad bill that you have
    proposed, we actually think it is important to pair that with
    more specific legislation on app store issues the way that some
    of the States are taking this legislation. We think this is an
    action that is important for Federal preemption. These markets
    are not only national, they are global. These decisions that
    are made in Cupertino are decisions that affect our business in
    Indonesia and all over the world, so this is a space in which
    specific legislation on the app store issues would be very
    welcome and very beneficial.
        Chair Klobuchar. Dr. Cooper.
        Dr. Cooper. Senator, as soon as you get a bunch of States
    considering this legislation, these guys will come running to
    you and say, ``you have got to give me Federal legislation. I
    cannot have 50 States.''
        Chair Klobuchar. I have experienced this before in other
    contexts, yes, but.
        Dr. Cooper. Yes. They will want it and they will figure
    they have a better chance to negotiate with you than the
    individual State.
        Chair Klobuchar. You mean this Subcommittee? I do not know
    about that.
        Dr. Cooper. This is the place, remarkable bipartisan. This
    is the place to fix the key things about the antitrust.
        Chair Klobuchar. No, no, no. I know. This is the place
    where we should fix them. Okay.
        Dr. Cooper. Yes.
        Chair Klobuchar. Okay. Ms. Daru.
        Ms. Daru. I just wanted to reiterate what Mr. Gutierrez
    said about having a specific app store bill just because the
    mobile phones are the gateway to so many aspects of our lives,
    banking, news, dating, music, health, fitness. Clearly, there
    are abuses that have been exposed today and in the House report
    that need to be addressed. We are concerned that if we wait for
    sweeping legislation or legislation that may need to be hold
    out in the courts over several years to understand what the
    impact is to the mobile ecosystem, we could have more
    irreparable damage done to competition and innovation in
    America.
        I do want to commend you and your bill because it is a
    great step in the right direction. We absolutely need strong
    prohibitions against exclusionary behavior and discriminatory
    behavior, but would just respectfully request that some
    consideration be given to an app store-specific bill.
        Chair Klobuchar. Right. I mean everything we are looking
    at, the newspapers allowing too because of what happened in
    Australia, what is happening right here in other news
    organizations to combine their bargaining power. This idea of
    an app store bill, some of the gateway bills. I still believe,
    and I am the author of the newspaper one and I am going to work
    really hard to get it done this year. Just like you are talking
    about, I do not think we can wait. The best thing would be to
    admit that we have a huge monopoly problem here across the
    board and to just put in some stiffer rules and standards.
        There is a number of Republicans right now, as I speak,
    that are with me on this too even though they are not on my
    bill yet, but on pieces of that bill, to be able to make it
    easier to bring these cases. That way then some of this
    behavior stops even if they are never brought in a case because
    people know that it is a real thing. It is going to happen if
    they keep acting like that. That is not just mergers going
    forward. It is also looking back at exclusionary conduct as
    well as some of the other violations we have talked about.
        Senator Lee, do you want to close with anything?
        Senator Lee. No. Thank you very much for holding this
    hearing. Thanks to each of you for being here and very
    informative.
        Chair Klobuchar. Uh-huh. Right. Exactly. Our two witnesses
    from Apple and Google, do you want to--I should give you an
    opportunity if you want to say anything about legislation and
    the like.
        Mr. White. Yes, Senator Klobuchar, and thank you. You are
    asking very important questions, particularly as it relates to
    funding of the enforcement agency, so we will be happy to
    engage with you and other Members of Congress as you work
    through these issues.
        Before I wrap this answer, I would like to say that each of
    the members on the panel here, the companies that are
    represented, are important partners of ours and they are
    raising issues. From where we sit, Senator, we are trying to
    keep--at an ecosystem level, we are trying to keep the cost low
    for the ecosystem and keep our prices competitive with the
    numerous distribution channels that developers have available
    to them in this very dynamic industry. I do worry that that may
    be difficult to do if in an effort to satisfy a very small but
    vocal set of primarily large companies, we damage the very
    foundation that has allowed the Android open source ecosystem
    to work so well for a much larger set of small and medium size
    business. That that is the risk and that is what we would want
    to engage with your office and other Members of Congress on as
    you tackle these very important questions.
        Chair Klobuchar. Mr. Andeer.
        Mr. Andeer. Senator, again, thank you for giving us the
    opportunity to participate today and share our perspective on
    this. When it comes to proposals, I spent a decade of my career
    in Federal Antitrust Enforcement, both with the Federal Trade
    Commission and the Department of Justice. I have a deep respect
    for what their role is and their job each and every day and an
    understanding of how difficult it is, so I am certainly a
    supporter for doubling and tripling down in terms of resources
    for those men and women that carry out a really important role
    each and every day.
        In terms of other issues, I have long appreciated your
    championing of competition. I recall when I was at the FTC you
    raising issues around pharmaceutical mergers and other things
    that we took a very careful look at, so I have always been very
    appreciative of your interest in this area and we look forward
    to engaging with you in the future.
        Chair Klobuchar. Okay. This has been quite informative I
    think for everyone and I think the facts that we have gathered
    here today are going to be useful for us for legislation, for--
    the Justice Department just today or this week. We have the top
    two positions filled with the third one on the way in the
    Justice Department, we have the FTC Commissioners being
    nominated, hearings. I was just at a hearing in Commerce for
    one of the nominees. There is a lot happening and a lot of
    interest from the administration.
        I do want to just tick through this just from my
    perspective. We have got a situation where we have got the fees
    that are higher than I ever imagined. I was looking at
    furniture stores and I could not figure out why one major one
    was not on the app store. That was about 3 weeks ago. I
    understand because they just probably decided I am not going to
    pay this high a fee. Because I thought, ``Did they do something
    wrong? Why aren't they--why can't I access this on my Apple?''
    It is literally what I thought. I thought, ``Oh, maybe they do
    not have one or maybe I just do it this way.'' I just think
    there is something pretty messed up about this because, as you
    said, it has kind of taken over the internet in that way.
        The second point is this idea of which we have to look
    further into, but self-preferencing and competing, having
    direct competition of their own products. The third one is just
    this idea that consumers are literally--that companies are
    being banned from telling consumers that they can get a better
    deal. When they are on a monopoly, the only way they can be on
    and get to those consumers in a big way is through one of these
    two app stores, which are on different platforms. Obviously
    people use those platforms for different reasons, but they each
    dominate those platforms.
        As I hear the arguments that I have heard today, point one,
    this argument that a lot of them pay nothing. That is great.
    That still does not inoculate a company from liability for
    anticompetitive conduct. We just have to remember that. There
    is ways you could structure this, obviously. Regulators, my
    guess, are going to have to get involved. You would not be
    hurting all the small apps, the little apps out there, but you
    are just making this so that people are not hurt by monopoly
    conduct.
        Second, we need to protect. One of the arguments we get is
    the security argument, more so I think from Apple, lesser
    extent from Google, because it allows sideloading. Of course we
    have to protect security and privacy. I think some of the
    arguments here made were there has got to be a better way to do
    this than a 30 percent charge for it or requiring apps to use
    only your in-app payment processor without barring developers
    from telling consumers. There is no way that telling consumers
    about a cheaper rate is going to affect consumer. You are just
    telling them, hey, you can also go over to this website.
        Third point made that the App Store is built by them and
    they put incredible work into it is true, so now they get to
    run it the way they want. As been noted, those were the
    arguments made in the past. That is I am sure what Standard Oil
    said. I was not there back then. I am sure that that is what
    AT&T said for sure. They had a horizontal and vertical
    monopoly. They put all this in. They produced all this great
    stuff. I know because I represented MCI shortly after that
    breakup and as they were trying to get into local monopolies
    and to try to compete in that market. I saw, despite this claim
    that the world was going to fall apart, in fact, the chairman
    of AT&T after all this went down said they were actually a
    stronger company because of it because they were forced to
    compete. We saw lower long distance rates and we also saw this
    incredible launch of a cell phone industry, which when you go
    back to the beginning was nothing but cell phones the size of
    Gordon Gekko's in the movie ``Wall Street'' at the very
    beginning.
        I just do not think this, we built it, so trust us and we
    can run it, is going to work anymore because if you look at
    history as a guide, of course people build things and they do
    great things. They employ a bunch of people. Then at some point
    it becomes a monopoly and then it becomes a problem as Adam
    Smith warned. Then we are supposed to be doing something about
    it without necessarily, of course not getting rid of these
    companies. We want these companies. It is just a question of
    how you ensure that everyone that works, that the companies
    that work or that are present in the capitalist system can do
    their bidding so that we actually have a capitalist system.
        The point number four, our app stores create jobs for many
    small entrepreneurs. We heard this. That is great and those are
    great things. Fostering innovation in that way is important,
    but again, it is not an inoculation. Another way you really
    foster innovation is when you allow companies that get to a
    certain point where they actually can compete. We will never
    know if Instagram could have competed against Facebook because
    they bought them because they viewed them as disruptive, to use
    Mark Zuckerberg's own word.
        That is the same thing here. I do not think you can just
    say, well, just because someone is a little more in our line of
    business, online dating compared to car rides, well, that is
    different than or some music or your products with Tile. I just
    think that there is not a coincidence that the three of you are
    before us today because of the fact that that is getting into
    their business. I just do not see this differentiation as
    Senator Lee so well pointed out.
        With that, I will keep the hearing open for 2 weeks. I just
    made that up. We will keep the record open for 2 weeks and we
    look forward to following up on all of this. We thank all of
    our witnesses for being with us through a lengthy hearing and
    we look forward to working with you. The hearing is adjourned.
        [Whereupon, at 5:33 p.m., the hearing was adjourned.]
        [Additional material submitted for the record follows.]

                                A P P E N D I X

    Miscellaneous submissions:

     ACT, The APP Assciation Letter, April 20, 201....................   124

     Antitrust and Economic Regulation Statement......................   275

     Big Data Platforms Statement.....................................   205

     Coalition for APP Fairness Letter, April 21, 2021................   120

     Computer & Communication Industry Assocation Letter, April 21,
        2021..........................................................   203

     Developers Alliance Letter, April 21, 2021.......................   314

     Hastings Law Journal.............................................   381

     Is your iPhone worth China's tyranny Statement...................   316

     Identifying Market Power in Digital Ecosystems Statement.........   318

     Public Knowledge Letter, April 21, 2021..........................   134

     Tech Freedom Letter, April 21, 2021..............................   459

     Tending the Garden Statement.....................................   136

     What Drives and Defines Digital Platform Power Statement, April
        19, 2021......................................................   322
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